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Jacki777
Level 1

issue refund to employee for retirement-403b withheld

I have a situation where a Salary reduction was submitted for a 403(b) retirement fund for an employee. The 1st deduction was made on a payroll PPE6.13.21. EE's deduction was $100 (pre-tax), ER's match was $135.45. We just received a refund check from the retirement company as the EE's account was not fully set up yet. What step(s) should I do to process $100 refund to the EE so that it can be in this month, for 941 & quarterly reporting, and make it correct for the ER? We will deposit the check in this month, June, so we can apply the credits accordingly....

-jt 

2 Comments 2
MaryLandT
Moderator

issue refund to employee for retirement-403b withheld

I'm here to provide the solution on how to issue a refund to your employee, Jacki777.

 

You can refund a deduction on the employee's next paycheck. Doing this will reverse the liability due and adds the amount back to the employee's gross or net wages so their earnings are correctly taxed. I'll also correct their Form W-2.

 

Additionally, doing this process of transaction won't cause an amendment as long as you're correcting the current year's payroll.

 

If you've already paid the liability in QuickBooks Desktop, please follow these steps:

 

  1. On the paycheck, under Other Payroll Items, use the same Employee Deduction payroll item to enter a positive amount that equals the amount exceeding the annual limit.
  2. When you see the message: Deductions are normally entered as negative numbers. "Are you sure you want to enter a positive deduction on this paycheck?" click Yes.

 

If the payment was created but not printed, delete the payment so the amount owed is returned to the Pay Schedule Liability area.

 

Don't make full adjustment if the amount of the adjustment is larger than the wages on the paycheck. If this happens, allocate the adjustment over multiple paychecks.

 

To record the check, please refer to this article for instructions and detailed steps: Record a payroll liability refund check.

 

For future reference, you can use this article that will serve as a guide to help prepare your tax forms: Year-end checklist for QuickBooks Desktop Payroll.

 

Keep me posted if there are other things you need help with concerning a refund to an employee. I'm always around to help you with payroll.

Jacki777
Level 1

issue refund to employee for retirement-403b withheld

Hi there, thank you for your quick response. We paid the tax liability for the payroll, fed taxes & 403. All of this has taken place in this month June 2021.I was trying to see if there was a way to process the refund to the employee in June, so that the 2nd quarter 941 for this year could reflect the correct amount as the $100 403(b) deduction was FWH exempt. Unfortunately the next pay date falls in July, next quarter and the clients next fiscal year. The most transparent approach does sound like processing through this upcoming payroll as you suggest by showing as a refund/deduction through payroll. The refund check will be deposited in June also.

 

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