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How to register year-end Bonus booked in 2020 paid in 2021?

DaManDaMan Member Posts: 20

Hi,

My accountant is suggesting I write up a "management bonus" in December and pay it out in 2021. I was explained I have 180 days to do so. She worded it out below but she is not on Wave. Sorry if this is very basic - I want to be sure I don't botch this since it is the first time I do this.

"As an accounting entry, you would record the bonus expense (i.e. salary expense) with a corresponding entry to your liability account. When the bonus is paid out, you reduce the liability by the offset to cash/bank or the shareholder loan account. It will be critical that you can demonstrate the payout is made within 180 days of the year-end of the year they are accrued."

Any input appreciated

in Payroll & Employees Technical Support

Comments

  • DaManDaMan Member Posts: 20

    anyone? :)

  • MikegMikeg Member Posts: 995 ✭✭✭

    @DaMan,
    Depending on a couple of things not sure that you can do that. First assumption, you are in the US. Second, you are accrual for tax return reporting. Third, you are a C corp. Fourth, the "bonus" is going to a shareholder who owns more than 50% of the company. If that is the case, the tax law does not allow the accrual. This is because the shareholder (controlling) is causing a deduction in year 2020 but won't have to declare it in income until 2021. IRC 267(b)(related party) trumps IRC 461 (accounting methods). Also, generally payment must occur within 2 1/2 months or 8 1/2 months in some cases.
    If that does not apply to you, then create a journal entry. Debit Salaries and Wages (expense) credit Management Fee Payable (liability).

  • DaManDaMan Member Posts: 20

    Thanks Mike, In Canada, Sorry, I should have specified.

  • MikegMikeg Member Posts: 995 ✭✭✭

    No problem. Then if it's allowed, you would create the journal entry above. At least the same accounting applies across the border. :)

  • DaManDaMan Member Posts: 20

    Ok I think I got it. Much appreciated! :)

  • rringuetterringuette Member Posts: 1
    Hey there wave community! So my employer paid me. I got the email confirmation that she did. I can not find it anywhere in my wave, it isn’t under banking/payments and it’s not in my bank account either. Not sure what to do, or how to find the money to transfer it to my account. Please advise?? Hope everyone is safe and healthy!
  • DaManDaMan Member Posts: 20

    Hi,

    You may wish to start a new thread for this matter. Not sure you will get a reply in my question :)

    @rringuette said:
    Hey there wave community! So my employer paid me. I got the email confirmation that she did. I can not find it anywhere in my wave, it isn’t under banking/payments and it’s not in my bank account either. Not sure what to do, or how to find the money to transfer it to my account. Please advise?? Hope everyone is safe and healthy!

  • JulianPJulianP Member Posts: 1,002 ✭✭✭

    Hello @rringuette !

    If your employer paid you via direct deposit, the funds should automatically deposit into your account that you provided during employee onboarding. If you are still having issues receiving your direct deposit, I recommend reaching out to your employer. If the issue persists, they can send us an e-mail to have one of our Payroll Specialists assist with the case.

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