Set Up an Employee Loan Paid Back in Automatic Installments

Related topics

Set up an employee advance paid back in manual installments

Set up other payroll deductions

Set up an employee

Pay employees

Perform other payroll tasks

Read the employee loan or advance overview

This method is to first issue a paycheck for the principle loan amount. Then, during payroll entry have Sage 50 automatically deduct installments until the loan is paid off.

In this example we will assume the employer issued an employee loan of $210.00 which is to be paid back in five installments over the next five payroll periods.

Click on the headings below to expand and display their respective procedures.

Note: You must subscribe to a plan that includes payroll to have access to payroll formulas and to have payroll fields calculated within Sage 50. If you have not subscribed, skip steps 2 and 3.

  1. From the Maintain menu, select Default Information, and choose Employees. Sage 50 displays the Employee Defaults window.
  2. Select the Employee Fields tab.

  3. On a blank line, enter Emp_Loan as the name of the new payroll field.

    Note: What you enter here will print on employee paycheck stubs in the deduction area.

  4. Enter a G/L account (other current asset) associated with the deduction. To display a list of existing accounts, type ? in this field or select the Lookup button. To add a new account, type + or double-click the field, which displays the Maintain Chart of Accounts window.

    This is typically the same account that was used to issue the loan initially, so it can be offset when the employee pays the loan back.

  5. Click OK. to save the field.
  1. From the File menu, select Payroll Formulas, then choose User-Maintained. Sage 50 displays the User-Maintained Payroll Formulas window.
  2. Enter EMP_LOAN as the tax ID.
  3. Enter a tax name using the NAME[space]YEAR rule. For example, enter EMP_LOAN11, where 11 is the current payroll year (2011).
  4. The effect on gross should be Subtracts from gross.
  5. Leave Filing Status at All.
  6. Classify the formula as a Deduction.

  7. In the Formula box, enter the following: (To create a new line in the formula, press CTRL+J.)

    "The following is an example of an employee loan based on 'Emp_Loan' as the payroll field setup in employee defaults. Limit stops payments when the loan balance equals zero. A is the payment amount of $50.00."

    LIMIT=0;

    A=50;

    B=-YTD(Emp_Loan)+Emp_Loan;

    C=A-((A+B)-LIMIT);

    D=IF((A+B)<LIMIT,A,C);

    ANSWER=-D

    Tax ID should be EMP_LOAN Tax Name EMP_LOAN xx where xx equals current payroll year (i.e., 11 equals year 2011)

    The sentence within quotes above the actual formula is meant as a comment or reminder of how the calculation is set up. Adding the comment is optional.

    Note: This calculation works for loans with any loan balance, whether they add up to the principle exactly or not. (In our example, there will be four payments of $50.00, and one payment of $10.00, to equal the loan of $210.00.)

  8. Save the formula, and close the window.
  1. From the Maintain menu, select Employees/Sales Reps. Sage 50 displays the Maintain Employees/Sales Reps window.
  2. Enter or select the employee who is paying the loan back.
  3. Select the Employee Fields tab.
  4. Locate the Emp_Loan payroll field, clear the Use Defaults check box, select the Calculated check box. Standard is not used because this calculation only applies to this employee.
  5. Next, enter or select the calculation name EMP_LOAN that was set up in the previous step.
  6. Save the change ,and close the window.

You have two options to issue the loan principle:

  • Include the Emp_Loan field with the loan amount (for example, $210.00) on the employee's next paycheck
  • Issue a separate paycheck with a gross amount of $0.00 and an EMP_Loan amount equal to the amount of the loan (for example, $210.00)

If you have subscribed to a plan, Sage 50 automatically deducts the amount you specified in the EMP_LOAN formula from the employee's paycheck until the loan is fully recovered.

Otherwise, you will need to manually calculate and enter the amount on the employee's paycheck.

How it works

New employee loans will be repaid automatically if you have subscribed to a plan that includes payroll. During the next four payroll entries (in this example), -50.00 will appear in the Emp_Loan payroll field. On the fifth payroll run, it will be -10.00. Employee loans that are not fully repaid at the end of the payroll tax year will continue without being reset to a zero balance (as long as the Run check box is selected in Step 3). Employee paychecks will show the running balance of the loan in the Year To Date column, even when a loan extends beyond a year end. Employees without loans will never see the loan field on their paycheck.

If you have not subscribed to a plan that includes payroll, you have to manually calculate and enter the amounts on the employee's paychecks.