What to do with manual or voided checks
When running a business there may be times when you will need to manually write an employee a check. This is especially true for small businesses. If this happens, it is important you know what to do with those manual or voided checks. Let’s take a look.
What is a manual or voided check?
While it is almost always best to make sure any wages or gifts that are given to an employee goes through your payroll system, sometimes employers will write a manual check to an employee. A manual is a check that was issued to an employee outside of the payroll system. These checks could be for:
- an error in payroll
- reimbursement for a business expense
- or even given as a bonus for the employee
What should an employer do with a manual or voided check?
If an employer has issued a manual check for whatever reason, it is critical to report those on payroll. If outsourcing your payroll, make sure to send those along to your payroll vendor before year end. All wages and bonuses must be reported on an employee’s Form W-2. Failure to do so can result in incorrect payroll tax withholdings for the employee and the employer. Even if the item is for a nontaxable business reimbursement, they must be reported under the employee’s wages. Incorrect W-2s would require adjustments to be made. Furthermore, W-2 adjustments can result in fines and penalties levied by the IRS.
It is important to note, that when a payroll check is given to the employee to account for the previously issued manual check, no additional funds would be received by the employee. Manual checks are also referred to as voided checks as the employee will receive a “voided” check that is for reporting purposes only.
Please contact us with any questions or issues with your manual checks.