Net Zero Check

There may be an occasion when a ‘net zero paycheck’ needs to be issued to an employee. The following instructions explain how to use Profits Plus to create a "net zero check". This method allows the employer to include the information from the ‘net zero check’ and be available for reports, W-2 information, plus provide the employee with a "stub" that contains all the additions and deductions from the ‘net zero check’.

A net zero check may be used when an employee takes a loan from the company, then is paying it back by cleaning the office. In this instance the employee would be paid in hours for the office cleaning but the loan deduction would come out of the office cleaning. If his is wanted to be kept on a separate zero check the net zero check can be used.
A net zero check may be used for benefits paid by the company for the employee, i.e. health insurance, life insurance, car allowance or car payments etc… We will give an example of a net zero check for life insurance benefits.

1. Add Deduction Code:

Go to:

Payroll (Module 1)
- Deduction/Addition Master File (Task 22)
  - Add New Deduction Record (Sub-task 1)

01. Deduct code : LIFEZR

02. Description : LIFE INS ZERO 17. Employer amt: 0.00

03. Add/Deduct : D 18. YTD $ Cap : 0.00

04. FICA tax : A 19. YTD Hrs Cap : 0.00

05. Medicare tax: A 20. Incl reg pay: Y

06. Federal tax : A 21. Incl ovt pay: Y

07. State tax : A 22. Incl spc pay: Y

08. City tax : A 23. Incl oth pay: Y

09. Amt type $ ?: N 24. Ask rate? : N

10. Amt type % ?: T 25. Box # on W2 : 0

11. Amt type hr?: N 26. W2 printcode:

12. Employee amt: -100.00 27. W2 status/bx: NN

13. Per pay $cap: 0.00 28. G/L number : xxx-xx

14. Per pay %cap: 0.00

15. YTD $ cap : 0.00

16. YTD hrs cap : 0.00

Fields 4 through 8: Check with your controller, accountant or the IRS to find out if this deduction should be taken out after tax or before tax.
Field 10 Amt type %?: T set this to T – percentage of net pay, After All other calculations.
Field 12 Emplyee amt: 100.00 set this to 100% or 100.00.
Field 25 & 27: Check with your controller, accountant or the IRS to find out how the deduction should appear on the W-2.
Field 28 G/L number: This is typically the same G/L # A/P used when vouchering the benefit (life insurance in this example).

2. Add Employee Recurring Record:

A record can be set up for each employee who will get a Net Zero check. Although if this net zero check is going to be only once a year the employee recurring record is not needed and this step can be skipped.

Payroll (Module 1)
- Employee Recurring Deduction (Task 20)
  - Enter New Deduction Record (Sub-task 1) See the document: Employee Recurring Deductions for complete instructions.

3. Attendance entry & editing:

Set the pay date, division, frequency (Sub-task 5) just like all pays.
Enter (Sub-task 1) the employee and enough hours (or base pay) so the gross pay can cover the taxes (if any) and the deduction.
For example: The life insurance covered for the employee for the year is $5,000.00, the amount of gross pay would need to be $5,414.25 to cover 6.2% FICA taxes $335.68 & 1.45% $78.51 Medicare taxes. The LIFEZR deduction would calculate to take out the net of the check which would be $5,000.06. (This would be with no federal, state or local taxes taken out of this check.) The object is to have the system calculate so the net zero check deduction is in this example $5,000.00.
- Check with your controller, accountant or IRS to find out if the net zero check deduction should be subject to FICA, Medicare, Federal withholding, State withholding, city or county withholding taxes.
- Also take into account if the employee has reached the FICA yearly limit of $117,000.00 in earnings. Or if the employee has been paid over $200,000.00 & is subject to the extra .9% Medicare tax.
On the second screen delete any other automatic recurring deductions. If the net zero check deduction code isn’t recurring for this employee type in the net zero check deduction code LIFEZR. It will be on the screen with 100% but no $ amount.

4. Calculate the Payroll:

Calculate the payroll.
Look at the P/R – Pay edit list (PAYREG). The NET-PAY should be zero.
- The DEDUCT should be very close to the amount you need to have in the net zero pay deduction. In this example it would need to be close to $5,000.00.
- If the deduction isn’t close enough to the amount needed, go back into Task 1 Attendance entry & editing to change the hours paid. (Or if the employee is salary, go into Task 17 Employee master, sub-task 2 Change, bring up the employee & change the pay.) Then go to Task 2 Calculate the payroll. Then read the reports again. If needed to back into Task 1 again to change the hours & re-calculate in task 2 again. Repeat this process until the deduction is very close to what you need.

5. Process the payroll (Task 3) - Print Payroll Checks:

Once the pay is calculated and ready to process, a "check" will print for the employee with all the pay information, hours, etc. appearing on the "check stub", but the check itself is for zero. When everything is correct Say YES to the question: Posting of Attendance header Records OK?

**Note: if you use the Direct Deposit option in Payroll and don’t want to use a physical check for the Net Zero check, mark the employee as using Direct Deposit to avoid wasting a check.

The check totals will be posted into Task 17 Employee master file, Task 18 Employee check history & Task 19 Employee deduct/add history.

The check totals will be included on the monthly, quarterly, yearly reports, W-3 & W-2.