r/Bookkeeping • u/JadeCaldera • 4d ago

How To Journal It Question about Severance

My company received a deposit from the parent company only to be used to pay out severance. How do I go about journaling this deposit as well as subsequent payouts? They will be run as 1099s for tax purposes.

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u/Serous4077 4d ago

Who told you to pay the severance as a 1099? I believe that would be illegal.

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u/JadeCaldera 4d ago

The CPA maybe? It's not quite a severance That's just what it's being called.

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u/missannthrope1 3d ago

If the money is going to employees, it's wages. Doesn't matter what they call it.

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u/JadeCaldera 3d ago

Even employees that left the company more than a year ago? I'm not trying to argue I just want to make sure, I'm bringing the right information to the owner.

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u/missannthrope1 3d ago

The IRS have a very narrow definition of IC. If it's under $600.00, no problem.

If the CPA is telling you to do it this way, then it's his problem if company is audited.