Expert: Shirley McAllister, CPP, PHR - 12/20/2008

Question
QUESTION: Shirley,

What's the payroll tax treatment for benefit payment made by employee on leave of absence?  Benefit payment is for medical, dental, and other costs usually deducted from employee payroll check.  If employee did not make the payment on a timely manner, can company collect when employee return?  And what the tax treatment of those collection?

Thank,

Ken

ANSWER: When the employee returns set up a payment plan for the owed benefits. You need to set up a deduction and code it to the same GL usually insurance that the ones held out of payroll checks are coded.

You would pay the employee their gross salary and deduct the benefit payment as a deduction the same as you do other insurance deductions, it would be treated no differently.

Shirley

---------- FOLLOW-UP ----------

QUESTION: Thank for the prompt reply.

What if LOA employee left company, deductions (employee's contributions) become noncollectable?  What's the tax treatment?

Ken

Answer
If they leave the company and do not pay it back than you can take them to small claims court to collect the payments.

If they do not pay it back it is added as wages to their W2 form. If they pay it back later, you will have to give a revised w2 form.

Shirley