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Accounting, Payroll & Pension Issues/Deferred Salary until company can afford to pay salary


QUESTION: Hi there,

I started a 501(c)(3) 2 years ago and, for now, I have kept my day job.  However, I have tracked my hours and, at some point, upon approval from my board, plan to get compensated for the hours I have put into the non-profit.  (Money we raise now goes into scholarships for the students we are helping and creating a base for next year... once (if) we are ahead in funds - then, the hope is to get paid retroactively.)

From an accounting (and legal) standpoint, what is the best way to:
1) account for this in the books
2) Handle this from a legal standpoint?

Thanks for any help you can provide.


ANSWER: Post the amounts to accrued wages. These are unpaid wages accrued until they are paid. It is legal, however, it will make a liability for the non profit.  When the accrued wages are paid than the accrued wage account is offset with the payment.Say the payment is 2000.00.

Wages Expense would be a debit of 2000.00 and Accrued Wages would be a credit for 2000.00. So when it is paid the bank is credited 2000.00 and the Accrued wages account is debited 2000.00.

Now it is zero.


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

QUESTION: This makes perfect sense - thank you very much for the quick reply.  I have two (hopefully, quick) followup questions:

1) From a tax and or reporting standpoint - is there nothing that has to be done?  Meaning, can I simply be given a lump sum check (say in 2013) that is taxed at 2013 rates?

2) From an accounting perspective, is there any problem with having this spread over multiple years - i.e. should I just make sure that hours and wages are put into the "accrued wages" category as you suggest above at the time that they are earned and then debited (all at once, in theory) at some much later time?

Thanks again so much!


I think they are supposed to pay out on year end or within 2 1/2 months of the next year. I pay our accrued wages out to our executives once a year on December 31st.

I am not sure on multiple years but I know that taxs are charged on payments when the payment is made not when it is earned.

You might have to call a tax expert to find out about multiple years.

I know it is also different for shareholders of S can C corps so non profit might have their own rules. I do not deal with non profit.


Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR


I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.


25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.


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P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

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