I'm here to provide a way to handle your over-withheld concern, @Lily24.
What you've experienced is a limitation of the program. No worries, there's a workaround you can do so that QuickBooks Desktop (QBDT) won't include the Paid Time Off (PTO) in calculating the taxes.
Before creating the paychecks of your employees, please preview the paycheck by clicking Open Paycheck Detail button. Then, edit the Regular Pay section minus the PTO items amount.
As for the over-withheld amount for the past 6 months, we'll have to create a payroll adjustment for this. Please refer to this article for the detailed steps: Adjust payroll liabilities in QuickBooks Desktop Payroll.
Moreover, to refund your employee, there are two ways to do this. First is by creating a payroll item and naming it as a Reimbursement then include it in your employee's future paycheck. The second is by creating a Check transaction and sending it to your employee.
I would recommend consulting with your accountant about this process for further assistance.
Moreover, to have the ability to exclude the PTO when tracking tax deductions, I recommend sending feedback to our product engineers. They can analyze your request further and decide to add this feature in future updates.
- Go to Help and select Send Feedback Online.
- Choose Product Suggestion.
- Complete the QuickBooks Feedback form.
- Once done, click Send Feedback.
Additionally, you can refer to this article for the guide for preparing your tax forms: Year-end checklist for QuickBooks Desktop Payroll.
Let us know if you have other concerns about refunding your employees in QBDT. We're here to help you in any way we can.
