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Reduce paycheck wages for an employee who has been overpaid

SOLVEDby QuickBooks62Updated March 27, 2023

Learn how to fix incorrect employee wages in QuickBooks Online Payroll and QuickBooks Desktop Payroll.

Sometimes, employees get overpaid which results in an incorrect amount on their gross pay. We explain how to correct an employee overpayment.

Select your payroll service for instructions.

Note: Not sure which payroll service you have? Here's how to find your payroll service.

Depending on processing times, you may be able to delete or void the paycheck then recreate it. If not, contact us to learn how to correct your employee wages.

Depending on processing times, you may be able to delete or void the paycheck then recreate it. You can also add a deduction item to a future paycheck to reduce wages for any overpayments.

Step 1: Create a payroll item to reduce wages

  1. Go to Lists, then Payroll Item List.
  2. Select the Payroll Item button, then New.
  3. Select Custom Setup, then Next.
  4. Select Deduction, then Next.
  5. Enter the name of the payroll item that will be easily identifiable, then Next.
  6. In the Liability account field, enter the same expense account that was used for the original compensation item with which the employee was overpaid. Select Next.
  7. Select a tax tracking type of Compensation. Select Next twice.
    Note: Select Compensation to adjust the year to date taxes that were withheld because of the overpayment.
  8. Select Calculate this item based on Quantity if the employee was paid hourly, or select Neither if the employee was paid with a salary item. Select Next then Finish.

Step 2: Add the payroll item to the next paycheck.

Add the new deduction payroll item to a paycheck for the overpaid employee, then enter the amount of the overpayment.

The deduction item must be added to a paycheck with equal or more earnings than the amount that will be deducted, as QuickBooks can't create a paycheck with a negative net pay.

  • If the employee was paid hourly:
    • In the Rate field for the deduction, enter the rate that was used when the employee was overpaid.
    •  in the Quantity field for the deduction, enter the number of hours the employee was overpaid.
  • If the employee was paid salary, enter the amount of salary the employee was overpaid. Leave the Quantity field blank.

If the overpayment is on a termination check, you'll need to collect the overpaid amount from the employee, then void and recreate the check.

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