How do you record a state income tax refund that will be applied to the next estimated (next year) state income tax due so as to reduce the payment?

Hi there, lstjacques.

Thanks for taking the time to reached out to us. I'm here to help and provide some information on how to record a state income tax refund.

Once you have an overpayment, QuickBooks will detect it and will automatically lower the amount of the next liability periods by the overpayment amount. You may also pull up the Payroll Liability Balances report, to check the overpayment amount. 

Here's how: 

1. At the top menu bar, click Reports.
2. Select Employees & Payroll. 
3. Choose Payroll Liability Balances. 
4. Set the date filter. 

For additional reference, you can check this article: Run payroll liability balances report. 

If you need further assistance from our phone support, here's how you can contact them: 

1. Click this link: https://payroll.intuit.com/support/contact/?infosrc=qs&service=16.
2. Select your payroll subscription.
3. Choose Payroll for the topic. 
4. Click View Contact Info to get the phone number.

If you have additional questions about the overpayment in QuickBooks. I'll be around to help. 

Thank you, but this is not about payroll but CT State income tax, which is not payroll tax, so this doesn't work for what we need.  Is there another solution?

Hello there, lstjacques.

Thank you for getting back to us in the Community. I'm here to provide additional assistance with State Income Tax overpayment in QuickBooks Desktop.

If you already consulted your State agency and they allow you to apply the overpayment to the current year, you can add the refund as a payment in the system. Once you enter them, it'll decrease your tax due in the system.

Here's how:

1. Click the Help tab at the top menu bar.
2. Click About QuickBooks (the last option at the bottom).
3. Press and hold the Ctrl + Alt + Y keys.
4. Click Next four times.
5. Click Create Payment.

I'm adding an article for more insights about entering historical tax payments:

Enter historical tax payments in Desktop payroll.

Please keep in touch with me here so I can ensure your issue is addressed.

Thank you, but when I go to read through and do it, still seems likes it's a payroll thing which is not what I wanted.  We've done a GJE and will fix the accountant will fix it manually.   Thanks for trying.

Hello there, @lstjacques.

Recording the refund you’ve received from your state to the correct account in the chart of accounts is my priority. With that being said, allow me to share some information on how this works in QuickBooks Desktop.

If I may ask, what account in the chart of accounts were affected when you send a payment for your estimated state income tax in 2018? If you use QuickBooks in paying your estimated state income tax, may I ask how did you made the payment? If the state income tax payments was paid after running a payroll, you may refer to the steps provided by my colleague, @JanyRoseB, in recording the refund. The refund will be applied to the payroll liability account.

If you write a check and paid your State Tax agency with it, then you can record the refund like how a vendor refund is processed in QuickBooks Desktop.

Lastly, if you are referring to the Sales tax you’ve paid. To record the refund you’ve received, you can do it by creating a sales tax adjustment. For detailed instructions, you may check out this article: Process sales tax adjustment.

If you’re still unable to record your refunds,  I’d recommend reaching out to Customer Care team. A specialist will be able to look up your account securely and further assist you via secured remote access session.

Here’s how to contact us:

1. Go to: https://help.quickbooks.intuit.com/en_US/contact.
2. Choose your QuickBooks Product.
3. Select your QuickBooks version.
4. On the Contact Us page, click a topic.
5. Click on the Get Phone Number button to see the support number.

Stay in touch with me and let me know how it works on your end. I ‘m always here to help you accurately record the refund you’ve received in QuickBooks Desktop.

You either Have a Refund, or Have the overpayment condition.

If you overpaid the Payroll item on the Liability Tab, the payroll system already has the Amount as negative. Next time you generate that payment, use Create Custom Liability payments and include the timeframe that lets you select Both what you accrued now and the amount overpaid, previously.

If you accidentally paid it outside of Payroll, then you would post that as Other Current Asset. Then later, you can show the earlier banking reduces what you owe; use Pay Liabilities, select what you owe. Click on the Expenses tab and put a Negative for the Other Current Asset and the amount you want to show is Applied now, hit Recalc and you have a Reduced Banking transaction, while showing you Paid Taxes for what you owed for that cycle, but the Banking is reduced.

If you got a Refund, you would Make Deposit to the same account you tracked it as overpayment; in my example, that would be "from" Other Current Asset.

There is no Payroll Adjustment to make. You never make a JE for anything to do with QB Payroll, either. That will make things Worse.

Thank you for responding.  First let me say that I do not use Quick Books to do payroll.  This issue has nothing to do with Payroll.  Connecticut has a new Business Entity tax in 2018.  We have never had this before.  That being said, we paid an estimated amount at the end of 2018.  Since then, our accountant has done our taxes and found that we over paid.  We will apply this over payment to the next estimated payment which is due in March 2019.  Instead of receiving an actual check and depositing it, we will just apply the over payment to the 2019 Qtr1 Estimated payment, making the payment less.  We made another account in "Other Assets" labeled "Pre-paid Taxes" and the accountant will do a Journal Entry to manually fix it during this fiscal year.  We were just trying to see if there was another way to do it.  Unfortunately everyone is trying to make this a payroll tax or sales tax issue and it is neither of those.  Appreciate the help, but we'll just fix it with a journal entry.

@lstjacques

It helps to explain this Income Tax payment was not employee deductions. Only a C Corp pays its own income taxes, and that omission is helpful for perspective.

"That being said, we paid an estimated amount at the end of 2018."

Posted as Other Current Asset (prepaid expense). Once the Actual Amount is known, you rebalance this against Expense, and/or pay out the Rest. So, if you Overpaid, the entry for Debit Tax Expense and Credit Prepaid taxes, once the tax amount is Known, means you let the overpayment Ride as Prepaid, already.

"Since then, our accountant has done our taxes and found that we over paid.  We will apply this over payment to the next estimated payment which is due in March 2019."

And that means you enter only the Next Amount as Prepaid; the overpayment is already sitting in Prepaid, carried over from the prior year. The Write Check is where you enter Prepaid Asset. That is the next banking event.

"Instead of receiving an actual check and depositing it, we will just apply the over payment to the 2019 Qtr1 Estimated payment, making the payment less."

Exactly. If you carry over $100, and owe $500, then your Next Prepayment Check is $400.

"We made another account in "Other Assets" labeled "Pre-paid Taxes" "

That's where it should have been, First. It isn't Expense when you Prepay Estimates. Change your First payment to flow differently.

"Unfortunately everyone is trying to make this a payroll tax or sales tax issue and it is neither of those."

Because you didn't give enough details in the beginning and we assumed you were asking about income tax Withholding.

Thank you for the help.  I will make sure that I keep that in mind going forward.  Appreciate the help.  Just to be clear, I did clarify in the 1st response that it wasn't a payroll issue...but you are correct, I didn't initially say that, my error.  Again, thank you for the help.

...Only a C Corp pays its own income taxes, and that omission is helpful for perspective...

Not so.  Many states have the ability to pay state taxes for pass-through entities (such as LLCs and s-corps) at the entity level.  The purpose of this is to capture the expense as a direct business expense instead of passing it through to the shareholder's personal taxes where SALT deductions are capped at $10K.  Admittedly this is a relatively new thing (probably just 2018 forward for most states).

Hi Team,

I need help in entering a State of Arizona Tax refund.

This refund is in the form of a check. I need help in recording this into QB.

Thanks for becoming part of the Community, jkumavat.

If you've received a refund check from a tax agency, it's possible you might have overpaid payroll taxes. I'd recommend checking your Payroll Liability Balance report and creating a payroll liability deposit to record it in your books.

Here's how to run your report:

1. In the left navigation bar, go to Reports.
2. Enter "Payroll Liability Balances" in your Find report by name search field.
3. Choose Payroll Liability Balances.
4. Enter an appropriate date range and customize it as necessary with its available options.
5. Select Run report.

Look for an amount that matches your refund check's amount.
Once you've found it, you'll need to record the refund check.

In the event you don't find an amount that matches it, review the refund notice. Your check may include interest, or some of the refunds may have been applied to past-due taxes.

If your tax agency withheld part of the refund, record it as a payroll liability refund check, enter your refund's full amount in the Deposit total field, then enter any appropriate tax payments to account for the part that was withheld. This will reduce your liability on the report.

In the event you're using our Payroll Assisted plan and the refund is from a period before you used Intuit's payroll services, you'll need to enter your check as a deposit to its appropriate bank account.

You'll also be able to find many detailed resources about using QuickBooks in our help article archives.

I'll be here to help if there's any questions. Have a wonderful day!