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

SOLVED•by QuickBooks•8•Updated December 04, 2023

Learn how to record a payroll tax refund check in QuickBooks.

If you received a refund check from a tax agency, you may have overpaid payroll taxes. We'll show you how to find the amount and then record the overpayment so your taxes are accurate.

To do this in QuickBooks Online Payroll, check out Resolve a payroll tax overpayment.

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.  

Step 2: Enter your payroll liability refund check

Select the scenario that applies to you to create the appropriate 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 amount of the refund as a positive number.
  9. Select OK.
  10. If you use QuickBooks Desktop Payroll Assisted, you’ll need to send the tax adjustments to us:
    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 In the Send/Receive Data window, you’ll see Tax Adjustments and funds to be withdrawn.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.
  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 full amount of your tax refund as a positive number.
  9. Enter tax payments to account for the part withheld by the tax agency. It'll reduce the liability on your report.
  10. 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.
  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 Group the deposit with Undeposited funds.
  7. In the Taxes and Liabilities section, select the payroll items affected by the refund.
  8. In the Amount column, enter the amount of the refund minus the interest as a positive number.
  9. Select OK.
  10. 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.
  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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