You don't need to create a negative check to zero out the liability, you can simply apply the payroll liability over-payment as a credit to your next liability. I'm here to help guide how.
First, negative liability happens when you have an overpayment made on your previous taxes or payroll liabilities, if you have a liability overpayment, you can simply apply it as a credit to a payroll tax account.
To apply a tax credit, you can follow these steps:
How to delete an item under "pay scheduled liabilities"
Please don't use this method if you are experiencing a legitimate software glitch (i.e., you always use the "Pay Payroll Liabilities" function, and never mess around with journal entries or writing checks directly to handle anything related to payroll liabilities). The method described above *will* in fact affect both the payroll liability and the expenses. The best way to figure out if you're having a glitch or not is to use the Payroll Liabilities Report for the year you're looking at and make sure that it shows $0 balances due, all paid. If it does, you're looking at a software glitch if you're seeing "Past Due" liabilities that you know aren't past due, and using this fix will not fix anything, it will make the "Past Due" liabilities disappear from the Pay Payroll Liabilities window, but it will also mess up your payroll liabilities for that period, and your expenses for whatever period you cut the $0 check in. I am still looking for an actual fix for this.