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Handle a payroll tax refund from an agency in QuickBooks Desktop Payroll

SOLVEDby QuickBooksQuickBooks Desktop Payroll5Updated 1 month ago

Learn how to deal with a tax refund check for payroll in QuickBooks Desktop Payroll.

If you received a refund check from a tax agency, you may have overpaid payroll taxes. You’ll want to check your payroll liability balance report and then create a payroll liability deposit to record this in QuickBooks so your taxes are accurate.

If you use QuickBooks Desktop Payroll Assisted and your refund is from a period before you used our payroll service, you’ll need to enter the refund check as a deposit to your bank account. Don’t use the instructions below. 

Step 1: Find the matching refund amount in QuickBooks 

  1. Create a payroll liabilities balance report. Look for the amount that matches the refund check amount. 
    • If you find an amount that matches, proceed to step 2. 
    • If you don’t find an amount that matches: review the refund notice.  The check may include interest, or some of your refunds may have been applied to past-due taxes.  

If the tax agency withheld part of your refund to cover unpaid taxes from the past:

  1. Complete all the steps in Step 2: Enter your payroll liability check. In the deposit total field, enter the full amount of your tax refund.
  2. Enter tax payments to account for the part withheld by the tax agency. It'll reduce the liability on your report.

If the interest was paid to you on the check, you don't need to add the interest amount to the deposit refund of liabilities. Follow these steps instead:

  1. Complete steps 1-5 in Step 2: Enter your payroll liability check.
  2. Select Group the deposit with Undeposited funds.
  3. In the Deposit total field, enter the amount of the refund minus the interest.
  4. Complete steps 7-9.
  5. Create a deposit for the interest and add the amount in Undeposited Funds. It'll let you make one deposit with both payroll liabilities and interest included.

Step 2: Enter your payroll liability refund check

  1. Go to Employees, and select Payroll Taxes and Liabilities
  2. Select Deposit Refund Liabilities.
  3. In the vendor dropdown, select the agency that sent the refund check.
  4. In the Refund Date field, enter the deposit date.
  5. In the For Period Beginning field, enter the first day of the pay period that the refund affects.
  6. Select how you want QuickBooks to handle the deposit:
    • Group with other undeposited funds: adds the amount in a holding account. This option requires you to use Make/Record Deposit to complete the process.
    • Deposit To: Record the amount to the account of your choice.
  7. In the Taxes and Liabilities section, select the payroll items affected by the refund.
  8. In the Amount column, enter the positive amount.
  9. Select OK.
  10. If you use QuickBooks Desktop Payroll Basic, Standard, or Enhanced for US or Canada, the process is complete.
  11. If you use QuickBooks Desktop Payroll Assisted:
    1. Select Employees, then Send Payroll Data.
    2. In the Send/Receive Data window, you’ll see Tax Adjustments and funds to be withdrawn. We won’t debit the amount.
    3. Select Send to Intuit.

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