When an employee is terminated, how is the unpaid portion of a payroll advance handled? There is no note, no interest charged. There is zero chance that the employee will pay the balance ($1200). Can I write it off like a bad debt? Do I report it on a 1099, or a W-2? Reporting it on the W-2 seems like the worst option. How would I deal with employee and employer FICA? I thought of grossing up the $1280 to include EE FICA. Then I would need to pay both EE & ER FICA. Not a great option, as I am already out the $1280 balance.