Reimbursement pay types are considered non-taxable in QuickBooks Online when employees have paid for business expenses using their own funds, Marianne. It is also mentioned in the IRS Publication 15, Circular E — Employer's Tax Guide.
It is possible that the reimbursement item you used was set up differently, which resulted in taxes being applied as you processed the employee's paycheck. I'd recommend creating another reimbursement item and reprocessing the paycheck. You can follow the steps outlined in this article to ensure you set up the item correctly: Reimburse your employee.
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Additionally, you can consult with your accountant or contact the IRS to determine whether the reimbursement you processing should be taxable or not. This will save you time when filing forms with the correct payroll data in the future.
We'll be right here if you have further queries in setting up payroll items and processing paychecks for your employees.
