How to record state withholding credit to reduce next payment?

I'm here to share the steps on how to record the state withholding credit, cefceh.

Before doing so, I recommend consulting your accountant to guide you in selecting the correct account to ensure the credit is correctly applied in your tax forms. If you don't have one, you may use our Find an Accountant tool. 

Here's how:

1. Create a liability check, proceed to Create an unscheduled or custom liability check section. 
2. Click the Expenses tab. And select the account where you want to apply for the credit.
3. Enter the amount of the credit (only up to the amount of the check) as a negative figure in the Amount field.
4. Write an explanation of the transaction in the memo field.
5. Hit the Recalculate button to lower the amount of the check by the amount of the credit. If there is a credit balance remaining, you can apply it to the next period by repeating steps 1 through 4.

I've added this link to help you pay payroll taxes in QuickBooks: Set up and pay scheduled or custom (unscheduled) liabilities. It helps you pay on time so you won't miss any deadlines.

Keep me posted if you have any other concerns about recording state withholding credit into QuickBooks. I'm always here to help. Have a great day ahead.

Will these steps correct/reduce the amount collected from the employee, thereby crediting the employee for the overpayment?

Good morning cefceh,

Thank you for reaching back out to the QuickBooks Community. To answer your question, it won't reduce the amount because WH is calculated based on marital status, allowances, and gross wages. However, if you need to stop calculating WH, you would have to change the status to "Do not With-hold" in the employee profile under the payroll information. I highly encourage you to connect with an accountant first to ensure that this is the best approach for your business. 

If you have any more questions, don't hesitate to let me know! I will do my best to address them. Be safe!