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SallyA1
June 25, 2024
Question

Terminated Employee Needs to be Reimbursed for Pre-Tax Deduction taken in Error

  • June 25, 2024
  • 1 reply
  • 0 views

Hello,

After reconciling a payroll liability account, we've discovered that an incorrect pre-tax payroll deduction was taken out from an employee's paycheck for several pay periods.  This employee has already been terminated, a final termination check was written and is "inactive" in our quickbooks payroll.

 

Is there a way to write another payroll check to this former employee for the refund that will calculate the correct withholding? 

1 reply

MariaSoledadG
MariaSoledadG
June 25, 2024

I have another way how to reimburse the pre-tax deduction to your former employee, Sally.

 

You can create a liability adjustment to correct YTD wages, taxes, and deduction items. Then, run a payroll summary report for the month or quarter you need to adjust. Ensure to take note of the amount of Payroll Items that need adjustment. 

 

To adjust your payroll liabilities, follow the steps below:

 

  1. Go to Employees, then Payroll Taxes and Liabilities.
  2. Select Adjust Payroll Liabilities.
  3. In the Date and Effective Date fields, select the last paycheck date of the affected month or quarter.
  4. In the Adjustment is for section, select Employee Adjustment to correct your employee’s YTD info. Then select the employee's name. Do this even if the item being adjusted is a company-paid item.
  5. Under the Item Name column, select the payroll item you want to adjust.
  6. Enter the Amount of the adjustment.
    • If the item is under-withheld, enter a positive amount to increase.
    • If the item is over-withheld, enter a negative amount to decrease.
  7. Enter the amount under the Income Subject to Tax column if you need to make a wage base adjustment.
  8. Under Memo, enter a note about the adjustment for reference.
  9. Select Accounts Affected, then OK.
    • Select Do not affect accounts to leave balances unchanged for the liability and expense accounts. The adjustment will only change the year-to-date amounts on your payroll reports.
    • Select Affect liability and expense accounts if you want the transaction to reflect in the liability and expense accounts.
  10. Click OK to close the Affect Accounts window. Select Next Adjustment if you have additional employees to enter an adjustment for. Otherwise, click OK to save the changes.

 

After that, create a regular check for the reimbursement of your previous employee. To learn more on how to use a liability adjustment, go through this article for more details. This will show you a step-by-step process on how you can correct employee information and fix a payroll item with the wrong tax tracking type: Adjust Payroll Liabilities in QuickBooks Desktop Payroll.

 

For future reference, you can use this article that will serve as a guide to help prepare your tax forms: Year-end checklist for QuickBooks Desktop Payroll.

 

Please get back to us if you have any questions about reimbursement of deductions. The Community is always here to help you.

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