Bank cleared check for wrong amount - How to reconcile?

Thanks for reaching out to us, @Apshas.

I can provide you some information to get around this issue and reconcile your accounts. 

You can create a check for the actual amount cleared. On the first line enter the amount that it should be and use whatever expense account it was for. On the second line enter the difference either as positive or negative, and use a current asset or liability account respectively. If the check was already created, edit it by adding the second line.

Once done, you can now reconcile your accounts seamlessly. To be guided through the process, you can refer to this article: Reconcile an account in QuickBooks Desktop

I’d also recommend working with your accountant for additional guidance. Your accountant can provide you their expert advice on how to record it properly and ensure your accounts are accurate. If you’re not affiliated with one, you can visit our ProAdvisor page and look for one from there.

Please refer to the articles below to see several steps on how you can resolve an issue in reconciliation and how it works in QBDT.

• Fix issues when you're reconciling in QuickBooks Desktop.
• Fix beginning balance issues in QuickBooks Desktop.

You can always get back to me if you need further assistance reconciling your accounts or managing your QuickBooks. You’re always welcome to tag me in your reply. I’ll be more than happy to work with you again. 

Hi Abegail,

Thanks for your quick reply!

While attempting to follow your instructions, I realized it may have been important to mention that this check was to our state Department of Revenue for withholding taxes, so when I go to edit the check, instead of the amount being listed under the "Expenses" tab (with the $ amount listed next to an associated assets or liability account), this amount is listed under the "Payroll Liabilities" tab with a first column category of "Payroll Item" instead of "Accounts" next to the dollar amount.

I've attached a photo showing this in which I entered the amount not taken out of the check during that statement period as a negative, but what Payroll Item do I specify it as? And will that affect reconciling the later deduction of that same amount (by the bank to correct their error?)

The bank eventually fixed the error and the remaining $3693 (that should have been taken out under the same check number) was deducted from our much later August bank statement.  Can you please explain also explain how best to record that in order to be able to reconcile the August statement without further issues as well?

I've truly wasted hours on this situation already and every time I think I've got it figured out another issue like this pops up (unfortunately all due to a banking mistake I had no control over). I've been frustrated and at totally at a loss for months now so I can't thank you enough for your help!

I appreciate you for getting back to us, Apshas.

Thanks for the screenshot. It gives me a visual representation of your concerns.

You can modify the payroll liability check. Then, on the Expenses tab, enter the liability or asset account and the amount -3693.

If you're unable to edit it, you can create another check.

Once everything's good, you can reconcile the account. You can check this article for the detailed process:  Reconcile an account in QuickBooks Desktop.

You may also run a payroll liability report to check information about payroll items assigned to a liability account. Here's a reference for the detailed steps: Run payroll liability balances report.

Feel free to mention my name whenever unexpected things happen. Keep safe!

Thank you so much for both of your help @AbegailS_ & @Adrian_A 

Your combined advice seemed to fix the issue making it possible to finally reconcile the bank statement for that period.

Could you please help me out with this final question I've been asking in order to be able to reconcile the later bank statement correctly (and be done with these issues for good!):

The bank fixed the error and the remaining $3693 (for the same check/check number) was deducted from our account in our August bank statement. How do we record that the remaining $3693 was deducted several months later in a separate reconciliation period?

What (if anything) else will I need to do to then reconcile the August bank statement without the bank’s $3693 “adjustment” deduction throwing off my ending balance for that reconciliation?

Do I just create a new check for that amount? Or does the fact that is a payroll liability tax payment mean it needs to be recorded differently?

Thanks again for your help!

Hello, Apshas.

I'll share additional information to be able to reconcile your current bank statement.

It's a good practice to record transactions the way it appears in your real-life bank account. However, some exceptions may apply depending on the situation. 

Recording of payroll liability payments is done in a different way. You don't need to use the Write Check windows. Instead, you'll have to create payroll liability checks to pay it. Please refer to this resource for a complete guide: How to use QuickBooks to pay payroll taxes and other liabilities.

Since the adjustment has been made for the same check for your August statement, you can add a memo to the original check ($4103.35) and void it. After that, you can create a liability payment check for $410.35 and $3693.

Here's how:

1. Go to the Employee menu.
2. Select Pay Liabilities.
3. Choose the withholding tax.
4. Enter the amount of $410.35.
5. Create another liability payment check for the $3693.

Once done, you can do a special reconciliation for the $410.35 and $3693 transactions. Please refer to this resource for a complete guide: Reconcile previously deleted and re-entered checking or credit card transactions.

I also recommend reaching out to your accountant. They might have a different approach on what to do with the August statement.

Feel free to add any details below if you have further questions about reconciliation. We're always here to help you.

Hi @Giovann_G 

Thank you for your reply but now I am even more confused because your recommendation appears to completely contradict the previous instructions I've received and already followed.  (Also, kind of frustrating because I made note of and asked how to address this situation with the much later August "adjustment" correction by the bank in every one of my previous posts so I'd hope that this question being repeatedly ignored meant that it would hopefully be an easy thing to work out.)

You're now telling me I need to delete the payroll liability check that I FINALLY successfully edited to reflect the amount that was actually deducted from our account at that time (and already reconciled for that period). 

Is that correct?  Is there no other way for me to add in this later deduction the bank made to correct their mistake?

I was so relieved to be finally getting somewhere with this and am now once again at a loss for what to do. 

I understand that you're probably supposed to recommend reaching out to our accountant, but we are a small family run business whose previous accountant unexpectedly retired during the pandemic. I couldn’t get any answers by calling QuickBooks customer support because apparently our current plan does not cover that. We’ve already incurred ridiculous fees from the state government for “underpaying our taxes” that we’ve been battling to have removed for nearly a year now, and have been unable to reconcile our account for the second half of 2021, all due to some person at the bank clearing our check for thousands less than we wrote it for.

I assure you if we currently had a reliable accountant to help with this, money to spare, hadn’t already exhausted all other attempts at getting this resolved, and weren’t on a deadline, I wouldn’t be desperately reaching out for answers here.

If any of you could review the issue that I'm trying to address in its entirety (figuring out how to record the bank's error of incorrectly clearing a payroll liability tax payment check for the wrong amount in one bank statement, and then issuing an adjustment to fix their error in a much later bank statement, in order to successfully reconcile both statements) and get back to me with some sort of consensus, I would appreciate it more than I can even express.

If I need to void the original check and add in two new separate ones as you suggested, I will attempt that, but I would love some sort of secondary confirmation that that is the correct course of action before I undo what I've already done, since it's not what I was told to do in the two previous replies from @AbegailS_ or @Adrian_A 

Thank you

There's no reason to remove the $410.35 liability payment check you successfully edited and reflected the amount deducted from your account, @Apshas.

I understand how important it is to you to reconcile the tax liability payment made months ago, and this may be uneasy since your accountant retired during the unprecedented time. No worries, I'm here to back you up and get past your hurdle in reconciling your bank account and help you ease the confusion.

Yes, there's another way for you to add in this later deduction the bank made. As I read your thread about this topic, you'll have to undo your reconciliation (going back to unreconcile each month) until August 2021 to enter the $3693 amount. And from there, redo the reconciliation up to the present (do them over again). In that manner, we'll be able to fix your reconciliation up to the recent date.

Before that, let's make sure to create a backup company file so we can retrieve your original files in case of circumstances.

Here's how to undo the reconciliation:

1. Go to the Banking menu.
2. Select Reconcile.
   
    
3. On the Begin Reconciliation window, tap the Undo Last Reconciliation button.
   
   
   

This will undo the last period you reconciled. Keep repeating the provided steps above until August 2021. Then you can enter the $3693 liability payment check:

1. Go to Employees, select Payroll Taxes & Liabilities, then choose Pay Scheduled Liability.
2. In the Pay Taxes & Other Liabilities window, check the tax or other liability you want to pay from the list. Then select View/Pay.
   
   
   
3. Review the dates (this should be August 2021) and the amounts due ($3693).
4. Select Save and close and then hit Close.

Once done, you can start your reconciliation in August 2021 until the present.

In addition, you'll want to bookmark how to use QuickBooks to pay payroll tax and other liabilities guide to serve as your reference in the future for recording tax payment liabilities. Then, you can take a look at our available customize payroll and employee reports to track your expenses.

Please let us know how it goes about making your reconciliations just. We're always delighted to assist you more. Take care, and more power to your business!

Hello @Apshas,

I have reviewed the solution you’ve shared and it's correct and accurate. Thank you for sharing your inputs to help address the issue.

We love to see members supporting one another! Have a great day.