My company (LLC) has been overpaying its employee bonuses based on a bad accrual number in revenues. This has been going on for the past 5 years and now we are wanting to true up to the actual number. What are our options for fixing this? The current plan is to reduce future bonuses over 3-4 years until the over-accural is paid back. Is that necessary or can you write that off without paying the company back?
USA Overpayment in Profit Sharing Bonuses
- Thread starter MBurkett
- Start date
Depends on your profit sharing agreement and you should have your attorney advise you. For example, if agreement says bonuses MUST be paid if earned then you cannot do a reduction. But again, use an attorney as this promises to get really, really ugly. As for the accounting, if the bonus liability account now has a big debit balance, unless atty says you can claw back the excess bonus payments all you are left with is to record the expense to bring the bonus liability debit balance to zero.
Ouch!
Ouch!