How can I correct a completed payroll where I paid the wrong amount in vacation pay accrual

Hi 10Lana, 

Welcome to the Community! Now that 2020 has come to a close it's important for your accrued vacation balances to be paid out correctly. I can help shed some light on how to handle this situation in QuickBooks Desktop payroll. 

If this paycheque is uncashed or not yet issued, you can correct the information by directly editing the paycheque. Here are the steps to do this:

• Locate and open the employee’s paycheque.
• Select Unlock Net Pay at the bottom of the Review Paycheque window.
• Override the figures to correct the vacation paid
• Review information and click OK.
• Then reprint the paycheque.

If the paycheque is already issued or cashed, an adjustment will need to be made to correct it. Here’s how to adjust the payroll liability:

• Go Employees at the top and choose Payroll Taxes and Liabilities.
• Select Adjust Payroll Liability.
• Set the right dates and select the Employee radio button.
• Under the ITEM NAME column, select the tax item you’re working with.
• Put the negative form of the excess amount under the AMOUNT column.
• Click OK.

You can find more information about adjusting your payroll liabilities in this Community article: Adjust payroll liabilities in QuickBooks Desktop

I hope this helps. Let me know if I can assist with anything else!

The simplest way to correct a payroll / pay cheque that was done incorrectly is to go back and edit that pay cheque so that it is correct.  Whatever the NET difference of the pay cheque is, should be put to an Employee Advance addition item.  That way, the NET amount of the cheque does not change and should not change, as that is what the employee actually received.

Next payroll, reverse the Employee Advance that you made on the previous pay cheque, effectively paying the employee the net difference that they missed getting on the original pay cheque.

The reason I say to use a custom item that you create yourself is because if you use the built-in QB Advance payroll item, it will calculate taxes.  In this situation, you don't want to adjust any taxes . . . you simply want to have a place to dump the difference in the NET amount of the pay cheque.

I set it up as an addition item and map it to a corresponding Other Current Asset account on my G/L that I call "Employee Advances".

It really is nothing more than a type of clearing account for mistakes and errors on pay cheques and the amount is only there for one pay period and then it is cleared out by the next payroll.  Do not use this item or account for an actual Employee Advance where you are loaning them money.  Then you would use the native QB Advance item and taxes should be applied.  This is by design so that if the employee never pays back that Advance, it automatically becomes income to them and taxes will have been remitted.

If this had occurred at any other time than December of 2020, you would just be able to remit the Tax, CPP & EI differences in the next remittance.  But because it occurred at year-end, in order to get the proper remittance amount for 2020, you would have to make a payment for the difference to CRA and request (or do it online) that the payment be transferred to 2020.  This will incur a late penalty, but it shouldn't be too much, if the Vacation difference you're talking about here isn't significant.

If you don't want to make all these corrections for 2020, then your only other option is to pay out the remaining Vacation pay in the current year and that income will be allocated to the employee's 2021 income, as well as your remittances for that payment would be part of 2021.

When I do the adjustments, where do they go?  I don't see them in my financials.  I want to check that it adjusted right. How can I find that?