Procedure to correct over withholding on Local Taxes


How to correct the mistake of over withholding Local Tax from an Employee's pay?


1. Go into an employee that was over-withheld through Cards| Payroll| Employees.

2. Select Pay Codes from the bottom of the window.

3. You will now need to assign a Pay Code of Business Expense to this employee. (If they do not already have this code.) We highly recommend setting up a new Pay Code, so you know exactly what you are using it for. Maybe call it Bus Exp (over tax), or something like that. The Pay Type will be Business Expense.

4. Make sure that:

a. All Subject to Taxes are NOT CHECKED.

b. There is NO Workers Compensation Code listed.

c. The Accrue Vacation/ Sick time is NOT CHECKED.

d. The Report Wages is NOT CHECKED. (This will make sure that the money you are refunding does not add to their gross wages, or figure any tax on it.)

5. Complete stepsa-d for each employee that needs to be refunded. When you have finished this, you may proceed.

6. Go to Transactions- Payroll- Transaction Entry.

7. Assign a Batch ID (maybe include that this is for refunding of over collected tax in the description).

8. Enter a transaction for the employee that needs a refund making sure to choose Pay Code for the Transaction Type, and the proper CODE of the business expense that you set up for each of these employees.

9. Enter the date and the dollar amount you want to pay each employee. (Make SURE that there is nothing in the State, Local, SUTA State, or Workers Comp amount columns.)

10. When finished with this employee, choose Save and then enter the next employee following steps 8 and 9. When finished with all employees, go to Step 11.

11. Close the Payroll Transaction Entry Window. Print the Payroll Transaction Audit Report, and look at it to be sure everything is correct.

12. If everything is correct on the audit report, build the checks (Transactions- Payroll- Build Checks).

13. Select a date range for the build.

14. DO NOT include any Deductions or Benefits

15. Select the batch that you just created in Transaction Entry.

16. Select Build when everything is correct on this window. Print out the Report and make sure everything is correct. (No Errors)

17. Calculate Checks by going to Transactions- Payroll-Calculate Checks. Print out the Report and make sure everything is correct.

18. Print the checks by going to Transactions- Payroll- Print Checks.

19. Process this batch. Print out all of the reports to make sure that nothing was updated other than the amount that the employee is being paid. All other deduction and tax reports should show $0.

20. Manually adjust the tax withholding amount and the taxable wage amount by using the Payroll Manual Check-Adjustment Entry window. To do this, follow these steps:

a. Click Transactions, point to Payroll, and then click Manual Checks.

b. Select Manual Check as the Check Type. Do not enter a Batch ID for this transaction.

c. Select the Employee ID that you want to update in the Employee ID list, and then click Transactions.

d. In the Transaction Type list, select the tax type that has to be adjusted. If it is applicable, select the appropriate code in the Code list that corresponds to that tax type.

e. In the Amount field, enter the overwithheld tax amount as a negative amount. This step reduces the tax withheld amount as necessary.

f. In the Taxable Wages field, enter the taxable wages amount as a negative amount. This step reduces the employee’s taxable wages as necessary.
g. Click Save, and then close the window.

h. In the Payroll Manual Check-Adjustment Entry window, click Post. Repeat steps 20a through 20h for each employee that has to be adjusted.

This article was TechKnowledge Document ID:5906

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