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Level 1

Refund of State Unemployment Tax

In response to the COVID-19 pandemic, my state has issued a refund of first quarter 2020 state unemployment taxes.  If that quarter's taxes were not yet paid at the time, no tax would be due.  If the tax had been paid already, that amount would be credited for the second quarter 2020, which was my case.  How do I show the "refund" - even though I did not actually receive the funds, and how do I apply it in Quickbooks to my balance owed for the second quarter?  Thank you!

6 Comments
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QuickBooks Team

Refund of State Unemployment Tax

I can help you in recording this transaction, @fishelec.

 

You can create a payroll liability refund check. This will increase the liability balance.

 

Here's how to enter a payroll liability check:

  1. Go to the Employees menu and select Payroll Taxes and Liabilities and click Deposit Refund Liabilities.
  2. Select the name of the vendor who submitted the refund check.
  3. In the Refund Date field, enter the deposit date.
  4. In the For Period Beginning field, enter the first day of the pay period that the refund affects.
  5. You can either Group with other Undeposited funds by adding the amount in a holding account. 
  6. In the corresponding Amount column, enter the positive amount.
  7. Select Ok.

You can check this article for more information about it: Record a payroll liability refund check.

 

Let me know if there's anything that I can assist. I'm always here to help. Have a wonderful day!

Highlighted
Level 1

Refund of State Unemployment Tax

Thank you.  I followed the instructions, but the amount QuickBooks shows that I owe increased by that amount, instead of decreasing.  

Highlighted
Level 1

Refund of State Unemployment Tax

Also, by using the Group with other Undeposited funds option, the amount shows in my Undeposited Funds account.  Where do I make this "deposit" since it did not actually go into a bank account?

Highlighted
QuickBooks Team

Refund of State Unemployment Tax

I'm here with some clarifications concerning payroll liability refund, @fishelec.

 

QuickBooks "holds" the refund in a special account named Undeposited Funds since the amount did not actually go into a bank. This works best when they hold the money they've collected for a while before they deposit it.

 

Also, after creating a payroll liability refund check, you'll have to enter a liability adjustment to reduce the liability. However, I recommend performing this on the advice of your accountant. You can also find an accountant if you need one.


Here's how to adjust payroll liabilities:

  1. Go to the Employees menu, then Payroll Taxes and Liabilities, and select Adjust Payroll Liabilities.
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  2. Use the same date as the last paycheck of the affected quarter. Use today's date if you’re working on the current quarter. The Effective Date is used to calculate amounts on your 940 and 941 forms as well as the Payroll Liability Balances Report.
  3. Select Employee Adjustment if the item you're adjusting is a company-paid item. It updates the YTD info reported on the employee W-2 form. Otherwise, select Company Adjustment if you want the balance to be removed from the Payroll Liability Balances Report.
  4. Select the employee.
  5. Complete the Taxes and Liabilities fields.
    • Select the Item Name you want to adjust.
    • Enter the Amount of the adjustment. Use a positive number to increase or negative to decrease the amount.
    • Wage Base is rarely needed, even when you override a tax amount on a paycheck.
    • You only use Income Subject to Tax when making a wage base adjustment.
    • You can use the Memo field to enter a note about the adjustment for future reference.
  6. Select Accounts Affected and then OK.
    • Select Do not affect accounts to leave balances unchanged for the liability and expense accounts. The adjustment will only change the year-to-date amounts on your payroll reports.
    • Select Affect liability and expense accounts to enter an adjusting transaction in the liability and expense accounts.
  7. Repeat for other employees if you need to, and select OK.


Then, you can check out our guide on running Payroll Summary report to make sure everything looks right.


Feel free to visit the Community again if you need help with QuickBooks. We're always here to help. Have a great day ahead.

Highlighted
Level 1

Refund of State Unemployment Tax

Thank you for the detailed instructions. Does anyone know detailed steps like this on QuickBooks Online? These menu options do not exist as described here. 

Highlighted
QuickBooks Team

Refund of State Unemployment Tax

I'm here to assist with your query, AdamWagnerConsulting.  

  

I'm here to help guide you on how to adjust payroll liabilities in QuickBooks Online.  

 

Here's how to do it: 

  1. Click Taxes, then  Payroll Taxes. 
  2. Choose Enter Prior Tax History.
  3. Select Current Year and Liability Period.
  4. Press Add Payment

  5. Choose Tax Type and Enter Liability Period.

  6. Enter Payment Date, and then enter Check Number and Notes.

  7. Create a Credit by entering a "Negative Amount

  8. Tap OK once done. 

Once finished, Let's run Tax Liability Report to Once finished, Let's run Tax Liability Report to verify the adjustment was added to the payroll. For more details about the payroll liabilities report, you can check out this article: Payroll Tax Liability Report

 

Keep in touch if you need any more assistance with this, or there's something else I can do for you. I've got your back. Have a good day.

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