How to post F-941 refund (retroactive refund of COVID-19 payroll tax credit)

Hello there, @MelissaC.

Let me assist you with entering the tax refund to your organization in QuickBooks Online (QBO).

To do that, we can create a Bank Deposit for the payments and add another line for the tax credit portion.

Here's how:

1. Go to the +New button.
2. Select Bank Deposit. 
3. In the ACCOUNT field, select the bank account where you want to deposit the value.
4. Tick the boxes of the transactions to deposit in the Select the payments included in this deposit.
5. In the Received From column, enter the name of the state agency.
6. Make sure to select an expense account in the ACCOUNT column.
7. Once done, click Save and close.

On the other side, you'll want to enter the refund amount you've received from the IRS. Follow the steps below to do so:

1. Navigate to Taxes and then Payroll Tax.
2. Choose Resources.
3. Click Add Payment after choosing Record Tax Payments.
4. Enter the following information after selecting a tax type:
   

• Period Start Date and Period End Date - the period that the taxes were accrued
• Payment Date
• Check Number (optional)
• Notes (optional)
• Tax Item Amounts

5. Select OK.

For further details on managing sales tax, please take a look at these helpful articles:

• Record and make bank deposits in QuickBooks Online
• Sales tax return and record tax payment in QuickBooks Online

If you have any additional queries, you can always return here. I'm here for you whenever you need me. Always be careful and safe.

@MelissaC 

Create a new other income account called 'Employee Retention Tax Credit' and assign that account to the deposit.  That will keep it separate from operations on your profit & loss so that it is easily distinguishable from taxable income.  Also, the wages that gave rise to the refund are now a disallowed deduction on your tax return for that year so your tax return will need to be amended.