How to account for advance given to terminated employee
The situation: an employee was given an advance by either check or materials charged to the company for personal use. The employee is unable to reimburse the company in a reasonable perior of time for the advance and the employee's final paycheck does not cover it.
I'm unsure whether to run this through payroll as wages with insufficient amounts for FICA/Medicare and how to report it on the 941 (if that is possible). I checked Circular-E (Pub 15) and found no guidance for this particular senario nor has the IRS been able to get me an answer. This is a situation which occurs from time to time and In my opinion this should be treated as additional "wages" similar to bonus for the employee. I vaguely remember reading that somewhere it can be treated in this manner. It may go into box 14 of the w-2 but again I have been unable to find enough information to account for it in any manner with current payroll reports. I know there are codes A and B for box 12 of the W-2 dealing with wages received insufficient to pay FICA/Medicare. Can someone please give me a run down on how to account for this type of transaction. Note, if you are not answering the question asked, please don't respond.