Withhold Cash Payment from Sales Reps Paycheck

Thank you for providing such detailed information, it gives me a helpful overview of the issue, TashaTGW.

When receiving the cash payment sale, you can use the Undeposited Funds account to deposit the money. Then, let's create a holding account to deposit the amount from Undeposited Funds. 

To set up a clearing account, here's how:

1. Go to the Lists menu at the top.
2. Choose Chart of Accounts.
3. Right-click anywhere in the Chart of Accounts, then select New.
4. In the Add New Account window, select the Bank radio button.
5. Hit Continue.
6. In the Account Name field, enter Clearing Account, Barter Account or Wash Account.
7. Do NOT enter an opening balance.
8. Pick Save & Close.

Next, record a bank deposit:

1. Go to the Banking menu at the top.
2. Select Make Deposits.
3. Pick the payment in the Payments to Deposit window.
4. Choose the Clearing account created to deposit the funds.
5. Hit Save and Close.

Once done, create a Journal entry from the holding account to an expense account or the one used where the deduction post when deducting the paycheck.

For more details about the process above, check below links:

• Set up a clearing account
• Create a journal entry in QuickBooks Desktop for Windows or Mac

You can go through Understand how the undeposited funds account works for additional information.

If there’s anything else you need, get back to me by commenting below. I'll be around to help. Have a great day.

The best way to track these funds is to create an Other Current Asset account and then use it when receiving payments and when deducting money from the employee's paycheck.

First, create a new Other Current Asset type account to use.  Perhaps name it "Employee Held Payments" or something like that.

Then, enable the option to record Payments in that account. In QuickBooks pick Edit | Preferences | Payments | Company Preferences.  Then remove the check-mark next to the oddly titled option "Use Undeposited Funds as a default deposit to account."

Then receive a payment that an employee is holding. Select your Employee Held Payments account in the Deposit To field that now appears on the Payment form.

The Asset account will now have a positive balance.

Then, set up a net deduction payroll item.  Select None as the tax tracking type and the Employee Held Payments account as the account.

When you use it on the employees check and enter the amount of the money they are holding, the paycheck will reverse/cancel the balance in the asset account.