Reconciling payroll overpayment that was partially repaid.

There's no need to modify the paycheck or item, smpri. Instead, we can accurately track and document the actual cash flow. Let me break down the details for clarity.

Since you've already recreated the $100 payment, create an expense transaction for the $400 payment with your employee as the Payee. This will account for the expense within your Chart of Accounts. You can refer to the image below: 

Then, record a Bank deposit to account for the $300 returned payment you received from your employee. Following this process ensures your QuickBooks records match your bank statements.  

Once that's complete, categorize all remaining transactions and proceed with reconciliation. Moreover, if you're unsure about the correct categories or accounts to use, I recommend consulting an accounting professional to provide further guidance to ensure you're on the right track.

Need more help categorizing payroll transactions? QuickBooks Live Expert Assisted offers personalized guidance from certified experts on bookkeeping, financial management, and streamlining processes. By accurately classifying transactions and maintaining balanced accounts, businesses can improve employee management and free up time for growth.

I'll be sharing with you some resources to streamline your account reconciliation and payroll workflow management:

• Fix issues at the end of a reconciliation in QuickBooks Online
• Handle a direct deposit paycheck that was not received by an employee
• Run payroll reports

Remember, you're always welcome to post any additional queries about reconciling payroll transactions or other QuickBooks concerns. The Community and I will be here to ensure you have all the support you need. 

You are right, and I will make a note in case this happens in the future. You are also correct about the $400 payment and $300 return being the only transactions to hit my bank account.

For now, since the paper check payroll item was in a previous quarter and taxes have been filed, I cannot edit or delete it. Right now, my bank account is reconciled (excluding that payroll item) and the employee has the proper withholding, but there is a discrepancy between my bank balance and the balance in Quickbooks. As a workaround, could I have her next payroll be a zero net paper check? I am assuming the check deposit should be categorized as Payroll:Wages. I think that would have the correct withholding, correct bank balance, correct money in our employee's pocket, and the QB/Bank balance would be settled, right?

@smpri 

"Right now, my bank account is reconciled (excluding that payroll item) and the employee has the proper withholding, but there is a discrepancy between my bank balance and the balance in Quickbooks."

Ahh, got it.  Since you need to fix this in the current period and your withholding is/was correct, the fix is to make a deposit in the current period and assign Payroll: Wages to it.  That reverses the effect of the $100 payroll check never given to the employee - it increases your bank account by $100 so you can clear that against the $100 payroll check the next time you reconcile your bank account and it reduces your Payroll: Wages by $100 because that's currently $100 overstated.