Question

What is the best way to claw back employee commissions that were paid in a prior period?

  • 4 October 2023
  • 2 replies
  • 86 views
W
Rank
Userlevel 2

Here’s the scenario that I cannot figure out:

 

Employee 1 paid commissions of $1000 in each June, July, and Aug (total $3000 in commissions over 3 months).  In Sept we realize that June was overpaid commission by $300.  We can enter a negative $300 amount on the next payroll using Payroll Adjustment but cannot figure out how to get the taxes (employee and employer) back.  Essentially he paid taxes on the $300 back in June and if we’re taking the $300 away from him we need to give him back the taxes paid on that $300.

 

There are also employer paid taxes that we need to get figured out but most importantly we need to get the employee the taxes paid back since we’re taking that $300 away.

 

Any suggestions are greatly appreciated!

 

2 replies

Laura02
Rank
Badge +18

Hello @WoodyGilbert ,

When the pay on the next check is reduced by negative commissions, the taxes on the next check will be similarly reduced. The employee’s year to date taxes (and the company’s year-to-date portion) will be correct after the next check.

Example:

Aug:   $1000 commission + $4000 salary = $5000 gross pay. $5000 x 22% = $1100 tax

Sept: $ - 300 commission + $4000 salary = $3700 gross pay. $3700 x 22% = $814 tax

Laura

Laura ~ Klear Systems, Inc. Irvine, CA. ~ Please remember to "Mark Best Answer" to help those who are facing the same problem.~
W
Rank
Userlevel 2

@Laura02 that is what I thought to do but the taxes still calculated took only the positive into consideration and did not remove the $1000 from taxable gross wages. 

 

See screenshots:

Here’s where I put in the negative pay :

 

 

 

Here’s the same transaction but the tab Taxes (did not back out the $1000 from taxable wages):

 

 

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