Sections Syndication |
Home : Essentials of Payroll : Loan Repayments
Loan RepaymentsLoan RepaymentsEmployees may either have loans payable to the company, or the company may have obtained loans on their behalf. For example, a corporate officer may have been extended a loan in order to move to a different company location and purchase a larger house. Alternatively, a company may have a computer purchasing arrangement with a local bank, whereby employees buy computers for their personal use and the company both guarantees payment to the bank and collects periodic payments from employees and remits them to the bank. In either case, the payroll staff must create a loan payback schedule for all affected employees and use it to set up deductions from their paychecks. If the loan is through a local bank, then the bank will likely provide a payback schedule to the payroll department. If the loan is internal, then the payroll staff must create a payback schedule in accordance with the terms of the loan agreement.
The calculation of a government-imposed tax levy is complex and can change whenever an employee's circumstances are altered; for example, as a result of a change in employee pay, changes in medical insurance deductions, or the addition of union dues as a new deduction. If an employer does not adjust for these changes, it can be subject to penalties imposed by the IRS for the amount of any tax levies that should have been withheld from the employee's pay. To avoid this problem, the payroll staff should maintain a "tickler list" for all employees who are subject to tax levies. This list should be incorporated into the processing procedure for every payroll, to remind the payroll staff to verify any changes to the targeted employees' pay and to alter the amount of their tax levies as necessary.
If a standard loan program for asset purchases with the company guarantees payment of the loans, then it behooves the company to require relatively short payback intervals, such as one to three years, to minimize its risk of having to pay back loans for employees who leave the company. The agreement with employees should include—in writing—a statement that if they leave the company prior to paying off the loan, as much as is legally allowable will be deducted from their final paychecks in order to pay down the remainder of any outstanding loans. 190
times read
|
||||
|
||||
