If you are on the cash basis of accounting, are you allowed to accelerate a payroll and pay in advance of the services being rendered? For example, could you pay the first payroll of 2009 at the end of 2008?
nish
Can You Accelerate a Payroll?
Dec 02, 2008
5 Replies
You can pay before the payroll period begins, during the payroll period, or after the payroll period ends. BUT, you must do all the withholding, make all the IRS, SSA, FUTA, SUTA, and other associated payments. AND you had better discuss it with whomever is preparing your payroll right now.
Dick
You can't pay money that isn't owed. You can pay an advance, but it is a loan until it is earned.
You would be correct if the taxpayer was on an accural basis. Then it would be classified as a prepaid expense.
Dick
I could see the IRS denying the deduction as a current year expense for the business.
If the issue is that you generally pay on the 1st, but want to pay on the
31st, then it isn't a problem. There aren't any days in January being expensed in December. But if you are talking about pre-paying for days or weeks in advance, then I could see the IRS kicking that transaction into the balance sheet as an asset - pre-paid salary - employee advance - etc.I would advise against bulking a lot of your employee's 2009 salary into December 2008. It's just not a good business move.
IRS would deny the deduction (upon audit) since prepaying is neither ordinary nor necessary.
ChEAr$, Harlan Lunsford, EA n LA
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