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Level 1

Overwithheld employee deduction - Online Payroll

An employee's health insurance coverage was terminated retroactively, and the employee had payroll deductions (pre-tax) taken for the insurance after coverage had ended. The support article "Refund an employee for a deduction that was overwithheld" explains how to handle this in Desktop Payroll, by entering a negative amount for the deduction on an individual paycheck.


However, I'm not sure it's possible to enter a negative deduction in Online Payroll, or to override a deduction amount on an individual paycheck. If not, what is the correct way to return the funds to the employee such that W-2 and taxes will be correct? Should I use the Other Earnings pay type?

3 Comments 3

Overwithheld employee deduction - Online Payroll

Welcome to the Community, EagleSPB.


I'd be glad to walk you through in processing a refund for your employee's deduction over withheld health insurance. 


Here's how:


  1. Go to the Workers tab and select Employees.
  2. Choose the employee's name.
  3. Click the Pencil icon beside Pay.
  4. Under How much do you pay, select Add additional pay types.
  5. Select Even more ways to pay drop-down, then select Reimbursement
  6. Hit Done.

Once added, this payroll item will appear in the Pay column when creating a paycheck for the employee.


Here's an article that will help you check with employee's reimbursements in Quickbooks Online: Reimburse an employee


Feel free to post again here if you have follow up questions.

Level 1

Overwithheld employee deduction - Online Payroll

Thanks for the prompt reply, GlinetteC.


A reimbursement would certainly get the employee's money back to her.  However, the solution in the post I linked to "adds the amount back to the employee's gross or net wages so their earnings are taxed properly and their Form W-2 is correct." I don't believe a reimbursement would do that.


Better that the employee be under-taxed than over-taxed, I suppose, but I'd like to get the taxation part correct.


Thanks again.


Overwithheld employee deduction - Online Payroll

Hello there, EagleSPB,


I recommend contacting our QuickBooks Online Support Team. They'll be able to help you in adjusting the liabilities and be able to review and check your payroll securely.

  1. Click Help inside QuickBooks Online.
  2. Select Contact Us
  3. Type adjust payroll liabilities in the description field, then click Let's talk.
  4. Select either Start messaging or Get a callback.

Stay in touch with me if you have additional questions about payroll in QuickBooks Online.

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