Learn how to enter a payroll liability refund cheque.
When payroll liabilities are overpaid, the liability balance becomes negative. To correct this, you can create a payroll liability refund cheque, which increases the liability balance.
Run a balance report
Before you proceed, create a Payroll Liabilities Balance report. Check for credits (amounts with negative values) that match the amount of refund and the tax item.
- If there are credits, follow the steps to enter a payroll liability refund cheque.
- If there are no credits, do a regular (manual) bank deposit. And post it to Payroll Expense.
Enter a payroll liability cheque
- From the Employees menu, select Payroll Taxes and Liabilities. Then select Deposit Refund Liabilities.
- Select the name of the supplier who submitted the refund cheque.
- In the Refund Date field, enter the deposit date.
- In the For Period Beginning field, enter the first 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. And lets you enter a deposit with multiple items. 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 item/s affected by the refund.
- In the corresponding Amount column, enter the positive amount.
- (Optional) Enter a note in the memo field.
- Select Ok.
- If you are using Basic, Standard, or Enhanced Payroll for US. Or the payroll offering for Canada, the process is complete.
If the taxing agency withheld a portion of the refund for a separate balance due:
- Complete Steps 1 to 11. (In the Deposit total field, enter the full amount of tax refund.)
- To account for the portion that was withheld, enter a Liability Adjustment to reduce the liability.
If interest was paid to you on the cheque...
Do not include that amount in the Deposit Refund of Liabilities. Follow these steps instead:
- Complete Steps 1 to 5.
- Choose Group the deposit with Undeposited funds.
- In the Deposit total field, enter the amount of the refund minus the interest paid.
- Complete Steps 7 to 9.
- Create a Deposit for the interest and add the amount in Undeposited Funds. This will allow you to make one deposit with both payroll liabilities and interest included.