Welcome to the QuickBooks Community, tpcpa52. I will be delighted to show you how to record Local Income tax and subsequent payments to the employee. Here's how:
Go to the Employees menu, select Payroll Taxes and Liability, then click Deposit Refund Liabilities.
Click the name of the vendor who submitted the refund check.
In the Refund Date area, add the deposit date.
In the For Period Beginning field, add the first day of the pay period that the refund affects.
Pick how you want QuickBooks to handle the deposit. The Group with other Undeposited funds adds the amount in a holding account, or Deposit To that records the amount to the account of your choice.
In the Taxes and Liabilities section, click the payroll item/s affected by the refund.
Add the positive amount in the corresponding Amount column.
Select Ok once completed.
The next step would be to create an addition item to show the tax repayment. Here's how:
Go to the Lists, then Payroll Item List.
Click the Payroll Item button, and click New.
Select Custom Setup, and click Next.
Choose Addition, and click Next.
Enter the name of the payroll item, then click Next.
Enter the same expense account used for the original compensation item with which the employee was overpaid.
Pick the tax tracking type Compensation. This is to adjust the year-to-date taxes that was withheld as a result of the overpayment.
Select Calculate this item based on Quantity for hourly employees, or select Neither if the employee was paid with a salary item., then click Next.
Hit Finish once completed.
Now, you will be able to add the additional payroll item to a paycheck for the overpaid employee. Please let me know if you have any additional questions or need clarification. The Community and I will be here to assist you. I hope you have a lovely day,.
I have the same issue but with QB Online Enhanced Payroll. Employee was deducted local city income tax in error. Taxes were not paid to the city. Employee needs to be refunded the full amount and the tax liability adjusted to zero. I know it should be obvious and easy but I'm stumped.