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Resolve a payroll tax overpayment

by Intuit•41• Updated 1 week ago

If you see a negative tax amount in QuickBooks or have a credit notice from a tax agency, you'll need to resolve the overpayment. This helps makes sure your tax forms and reports are accurate. Common reasons for overpayments include a decreased state unemployment (SUI) rate, voided paychecks after a payment was made, or a duplicate tax payment.

Here’s how to resolve payroll tax overpayments in QuickBooks Online Payroll and QuickBooks Desktop Payroll.

Before you start

Note that resolving the overpayment in QuickBooks records your action for reporting purposes. You must still contact the IRS or your state tax agency to request a refund or make sure that the credit will be applied to a future period.

Resolve the overpayment

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, you can leave the overpayment as is. The credit will automatically apply to any new payroll tax liabilities within the current quarter. Any remaining credit when the quarter closes will reflect on your return as an overpayment.

To request a refund or apply the credit to the next quarter, follow these steps.

  1. Follow this link to complete the steps in product Open this link in a new window
  2. Select Payments.
  3. Find the overpaid tax, then select Resolve.
  4. Choose one of the available options:
    • Request a refund 
      1. Recommended if the quarter where the credit was generated has closed.  You'll need to contact your tax agency to get your refund. If your auto tax is on, and we pay and file your taxes for you, we’ll choose this when we file our forms.
    • Apply to a future tax payment
      1. Not recommended unless you have determined the credit is valid and hasn't already been applied to any other liability.
  5. Select Confirm, then Done.

The steps to resolve an overpayment in QuickBooks Desktop Payroll depend on your payroll plan.

  • Current-quarter overpayments: The credit will automatically be used for future payrolls within the same quarter. If a credit balance remains at the end of the quarter, it'll be noted on the appropriate tax form.
  • Prior-quarter overpayments: The credit will appear on your Payroll Liability Balance report. Contact the tax agency to get your refund. Once you receive the refund, you need to enter the refund of liabilities into QuickBooks.

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.

Before you proceed, consult your accountant to ensure the credit is applied to the correct account for 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.

Related links

QuickBooks Desktop Payroll AssistedQuickBooks Desktop Payroll BasicQuickBooks Desktop Payroll EnhancedQuickBooks Desktop Payroll StandardQuickBooks Online Payroll CoreQuickBooks Online Payroll EliteQuickBooks Online Payroll Premium