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A
agiese
October 22, 2021
Question

Refund employee payroll pre-tax deduction made in error

  • October 22, 2021
  • 1 reply
  • 0 views

I need to refund a payroll deduction (pre-tax 401k) made in error for $167.52.

 

The refund is subject to IRS payroll tax (7.65% for the employee and 7.65% for the employer) therefore the end result is a payroll check that looks like:

 

Gross pay/taxable reimbursement $167.52

Employee taxes:

$10.39 social security

$2.43 medicare

Net pay $154.70

Employer taxes:

$10.39 social security

$2.43 medicare

 

I've discussed this for an hour with a Quickbooks payroll chat assistant, see the VERY unhelpful discussion below. Then I discussed it with a Quickbooks expert over the phone, who wanted to help and was kind but had no answer for me, as if Quickbooks online just doesn't have a way to do this?!?!  How could this be?

1 reply

M
Mich_S
October 22, 2021

Greetings, @agiese.

 

Let me provide some insights on how to refund an employee for a deduction made in error.

 

If you'll be paying him again, use the 401k item to add the money to the paycheck (backwards), or if that's not possible, create an extra item if applicable and code it to the 401k tax tracking type. 

 

Otherwise, adjust the 401k amount with an employee-based liability adjustment.  On the adjustment Click the Accounts Affected button and pick Do not affect accounts. Payroll reporting will be affected, but not accounting.

 

Then, using the same liability account that the 401k item uses to back out the accounting, write him a regular check.

 

I recommend contacting Payroll Support if you'll have any trouble with the process. They can investigate it further and give you the best resolution to your concern. 

 

I'm also adding this article about the list of payroll reports you can access in QuickBooks: Run payroll reports.

 

 

Just hit the Reply button if you have other questions about this matter or with QuickBooks. We're here to back you up anytime. 

 

 

 

A
agieseAuthor
October 23, 2021

Thank you for the quick response. 

 

Yes, I would like to add the money back to the paycheck (a negative deduction) like so many other payroll programs allow.  However, QB Online will not let me do this in any fashion I've tried or following you're suggestions.  In addition, the only new payroll items I'm able to create are nontaxable so it will not resolve my issue.  When reimbursing an employee their 401k contribution, taxes must be pulled.

 

As for your 2nd suggestion, again it does not appear that QB Online allows liability-based adjustments. This is helpful for QB Desktop users.

C
Catherine_B
October 23, 2021

Hello there, agiese.

 

Let me share some insights about adding taxable deductions to the employee's paycheck.

 

 Our supported pay types and deductions don't have taxable items for Social Security and Medicare alone. If you want to reimburse the employee, you can manually write a check not through payroll since the option is unavailable. 

 

Here's how to create a check: 

 

  1. Go to the + New option.
  2. Click Write check.
  3. Select the employee's name and enter the check details.
  4. Enter the correct category and amounts.
  5. Click Save and close.

For us to adjust the wages and taxes being withheld from the existing paycheck, you can get in touch with our Payroll Support Team again. They can perform a payroll correction for QuickBooks Online is unable to create a liability adjustment.

 

Feel free to check out these articles for your reference in case you need ways on how to keep track of your payroll details and in filing your payroll taxes:

 

You can always leave your questions in the Community. We're available 24/7 to help. Take care!

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