Can You Accelerate a Payroll?

#4 12-04-2008, 11:45 PM

Paul Thomas, CPA wrote:
- quote -

> "Dick Adams" <rdadams[at]panix.com> wrote
> > jack <jack[at]yahoo.org> wrote:
> > > "nish" <nisha[at]nunya.org> wrote:
> > > > 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?
> > > 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.
> 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

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

#3 12-03-2008, 12:37 PM

"Dick Adams" <rdadams[at]panix.com> wrote
- quote -

> jack <jack[at]yahoo.org> wrote:
> > "nish" <nisha[at]nunya.org> wrote:
> > > 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?
> > 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.

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.

--
Paul A. Thomas, CPA
Watkinsville, Georgia

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

#2 12-02-2008, 07:59 PM

jack <jack[at]yahoo.org> wrote:
- quote -

> "nish" <nisha[at]nunya.org> wrote:

> > 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?

> 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

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

#1 12-02-2008, 05:50 PM

"nish" <nisha[at]nunya.org> wrote in message
news:U-Cdnd8-6aKbNqnUnZ2dnUVZ_rTinZ2d[at]giganews.com...
- quote -

> 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?
You can't pay money that isn't owed. You can pay an advance, but it is a

loan until it is earned.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

12-02-2008, 05:16 PM

nish <nisha[at]nunya.org> wrote:

- quote -

> 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?

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

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

#-1 12-02-2008, 04:18 AM

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

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Similar Threads
Thread	Forum	Replies	Last Post
Payroll Taxes Frank A Spina: Not really a money question but the info I get can really help me in money. I am a salaried employee with some pre-tax benifits. I have 3 kids and...	Microsoft Money	5	08-05-2005 01:23 AM
NY S Corp payroll Wickerlove: I understand that legally, S Corp owners are employees and must be on the payroll w/ all appropriate taxes taken out. But someone told me that if...	Taxes	4	04-14-2004 07:24 AM
Accelerate Capital Losses Read: Is there any way to accelerate (stock sale) capital loss carry-overs to more than $ 3,000 per year. -- Read <<...	Taxes	5	04-05-2004 10:07 PM
Payroll Taxes Steve: My husband was employed by a company until July of this year. He now works for a different company and does some part-time work for a subsidiary...	Taxes	11	10-30-2003 03:40 PM

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode