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Resolve a payroll tax overpayment

SOLVEDby QuickBooks110Updated 1 month ago

Learn how to handle overpaid taxes in QuickBooks Payroll.

Are you seeing a negative tax amount in your payroll product, or have a credit notice from the IRS or state agency? We explain how to resolve tax overpayment issues.

Do you need help with an underpaid payroll tax? Check out resolve a payroll tax underpayment.

Step 1: Determine if the overpayment is valid

Not all tax overpayments are valid. The following are examples that can lead to invalid overpayments, and you’ll need to fix these issues rather than resolve the overpayment:

  • Incorrectly entered tax rate
  • Incorrect liability period on a tax payment
  • Incorrectly recorded historical tax payment

The following are examples of valid tax overpayments:

  • Your tax rate decreased after a tax payment was made
  • One or more paychecks were voided or deleted after a tax payment was made
  • You made a duplicate tax payment in the same liability period

Step 2: Resolve the overpayment

If you received a credit notice for an overpaid payroll tax from the IRS or your state agency, see What to do if you receive a payroll tax notice.

You can resolve some payroll tax overpayments in your payroll product to correct your reports and tax forms.  Select your payroll plan below for instructions.

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

If the quarter hasn't ended yet, you can leave the overpayment as it is. It'll cover any additional payroll tax liabilities you have for the rest of the quarter, until it's all used up.

But if you want to apply the overpayment to the next quarter or request a refund instead, follow these steps:

  1. Go to Taxes, then Payroll tax.
  2. Select Payments.
  3. Look for the Overpaid tax, then select Resolve. If you don’t see the Resolve option, contact us for help.
  4. Select one of the following if available:
    • Request a refund (Note that you'll need to contact your tax agency to get your refund)
    • Apply to a future tax payment (recommended)
  5. Select Confirm, then Done.
  6. Contact the IRS or your state agency to request refunds or apply taxes to future periods.

Contact us to resolve your tax overpayment.

If you received a refund check from a tax agency for overpaid payroll taxes, you can record it as a deposit. If you’d like to apply the credit to the next payment, you must first create a liability check and then apply the credit.

Note: Before you apply a tax credit to a future tax payment, talk to your accountant. Find out which account to select so the credit is correctly applied to your tax forms.

  1. Go to Employees, and select Payroll Taxes & Liabilities
  2. Select Pay Scheduled Liability.
  3. In the Pay Taxes & Other Liabilities section, select the tax or liability you want to pay. Select View/Pay.
  4. Select Check/E-pay.
  5. Select the Expenses tab. 
  6. Select the account where you want to apply the credit.
  7. Enter the amount of the credit (up to the amount of the check) as a negative figure in the Amount field.
  8. In the memo field, enter an explanation of the transaction.
  9. Select Recalculate. If you still have a credit balance, you can apply it to your next payment.

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