This article describes how to correct a pay check that had too much local tax withheld.


1. Click Setup, point to Payroll, and then click Pay Code.

2. Click the Add button and create a new Pay Code using the following options:

a. Select Business Expense for the Pay Type.

b. Enter a Pay Code name and Description such as Bus Exp - over tax.

c. Click Next.

d.Clear all the tax options that the pay code may be subject to.

e. Click Next.

f. Set both the Accrue Vacation/Sick time to 'No'.

g. Click Next.

h. Would you like to report this pay code as wages must be set to 'No'. (This will make sure that the money you are refunding does not add to their gross wages, or figure any tax on it.)

i. Click Next.

j. Select the Posting Account.

k. Click Add.

l. Click Finish.

3. Click Payroll, point to Employee, and then click Codes.

a.Select Employee.

b.Click Add.

c.Click Pay Codes.

d.Assign a Pay Code of Business Expense to the employee.

e.Click Add.

f.Click Finish.

4. Complete these steps for each employee that must be refunded. When you have completed this for each employee, you may proceed to Step 5.

5. Click Payroll, and then click Transactions.

6. Enter the Pay Periods for which you want to pay the employee's.

7. Enter a transaction for each employee that requires a refund making sure to select the correct Code of the business expense that you set up for each of these employees.

8. When finished with all employees go to step 9.

9. Close the Payroll Transaction Entry Window.

10. If everything is correct on the edit list, create the checks by clicking Payroll and then click Create Checks.

11. Select a date range for the build and then click Next.

12. Clear any employee's you do not want to pay and then click Next.

13. DO NOT include any Deductions or Benefits clicking Next on each screen.

14. Preview the Employee Checks by printing the Precheck Report in the Preview Employee Checks window.

15. Complete the payroll wizard with the result being the posting of the checks.

16. Click Payroll, click Manual Checks and make an adjustment to the business expense pay code you created to reimburse the employee.

a. Select the first employee you want to adjust and enter the transactions.

b. The first transaction must be transaction Type of Pay Code then select the business expense pay code. Enter the negative amount for the business expense pay code in the Amount field.

c. On the next line enter a transaction with a transaction Type of Local Tax and select the local tax code. Enter the negative amount for the local tax in the amount field.

d. Post the manual check.

17. Repeat steps a-d for each employee that must be refunded. When you have entered all employees go to step 18.

18. If you are using Accounting, Banking, or Payables, you may have to make an adjusting entry in that module to show that you as the employer do not have to submit as much local tax as you had originally figured.

NoteThe W-2 takes the local tax information from the Employee Record Summary Inquiry window that can be found by clicking Payroll, pointing to Inquiry, and clicking Code Summary. Whatever is listed there for Year-to-Date tax withheld is what will print on the W-2.

This article was TechKnowledge Document ID:30680

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