Learn how to record a payroll tax refund cheque in QuickBooks.
If you received a refund check from a tax agency, you may have overpaid payroll taxes. We'll show you how to find the amount and then record the overpayment so your taxes are accurate.
To do this in QuickBooks Online Payroll, check out Resolve a payroll tax overpayment.
Step 1: Find the matching refund amount in QuickBooks
- Create a payroll liabilities balance report. Look for the amount that matches the refund check amount.
- If you find an amount that matches, proceed to step 2.
- If you don’t find an amount that matches: review the refund notice. The check may include interest, or some of your refunds may have been applied to past-due taxes.
Step 2: Enter your payroll liability refund cheque
Select the scenario that applies to you to create the appropriate refund check:
The refund amount matches my report without interest or partial refund
- Navigate to Employees and select Payroll Liabilities.
- Select Deposit Refund of Liabilities.
- In the Supplier dropdown, select the agency that sent the refund cheque.
- In the Refund Date field, enter the deposit date.
- In the For Period Ending field, enter the end day of the pay period that the refund affects.
- Select how you want QuickBooks to handle the deposit:
- Group with other undeposited funds adds the amount in a holding account. This option requires you to use Make/Record Deposit to complete the process.
- Deposit To records the amount to the account of your choice.
- In the Taxes and Liabilities section, select the payroll items affected by the refund.
- In the Amount column, enter the full amount of your tax refund as a positive number.
- (Optional) Enter a note in the memo field.
- Select OK. If you are using the payroll offering for Canada, the process is complete.
The tax agency withheld part of my refund
- Navigate to Employees and select Payroll Liabilities.
- Select Deposit Refund of Liabilities.
- In the Supplier dropdown, select the agency that sent the refund cheque.
- In the Refund Date field, enter the deposit date.
- In the For Period Ending field, enter the end day of the pay period that the refund affects.
- Select how you want QuickBooks to handle the deposit:
- Group with other undeposited funds adds the amount in a holding account. This option requires you to use Make/Record Deposit to complete the process.
- Deposit To records the amount to the account of your choice.
- In the Taxes and Liabilities section, select the payroll items affected by the refund.
- In the Amount column, enter the full amount of your tax refund as a positive number.
- Enter tax payments to account for the part withheld by the tax agency. It'll reduce the liability on your report.
The refund check includes interest
- Navigate to Employees and select Payroll Liabilities.
- Select Deposit Refund of Liabilities.
- In the Supplier dropdown, select the agency that sent the refund cheque.
- In the Refund Date field, enter the deposit date.
- In the For Period Ending field, enter the end day of the pay period that the refund affects.
- Select Group with other undeposited funds.
- In the Taxes and Liabilities section, select the payroll items affected by the refund.
- In the Amount column, enter the full amount of your tax refund as a positive number.
- Select OK.
- Create a deposit for the interest and add the amount in Undeposited Funds. It allows you to make one deposit with both payroll liabilities and interest included.
