How to correct over-withholding of employee payroll taxes in Microsoft Dynamics GP

To correct the mistake of over-withholding payroll taxes from an employee in Microsoft Dynamics GP, follow these steps:

1. In Microsoft Dynamics GP point to Tools on the Microsoft Dynamics GP menu, point to Setup, point to Payroll, and then click Pay Code.
2. Create a new pay code that has a pay type of Business Expense. (This is the only pay type that allows you to not include it as wages again.)  To do this, follow these steps.
   
   Note This pay code will be used to repay the amount that was over-withheld from the employee. If you have an existing pay code that you want to use, you can skip this step.
   1. In the Subject to Taxes section, click to clear all the check boxes that are listed.
   2. Make sure that there is no Workers Compensation Code listed.
   3. Click to clear the Accrue Vacation check box and the Accrue Sick Time check box.
   4. Click to clear the Report Wages check box. When you click to clear this check box, the money that you refunded is not added to their gross wages. Additionally, it is not used when taxes are calculated.
3. On the Cards menu, point to Payroll, and then click Pay Code.
4. In the Employee ID field, select the employee who had taxes over-withheld.
5. In the Pay Code field, select the pay code from step 2.
6. Click Save.
7. Complete steps 3 to 6 for each employee who has to be refunded.
8. On the Transactions menu, point to Payroll, and then click Transaction Entry.
9. In the Payroll Transaction Entry window, enter a batch ID in the Batch ID field.
10. Enter a transaction for each employee who needs a refund. Make sure that you select Pay Code in the Trx Type field, and then select the pay code for the business expense type that you created in step 2 in the Code field. Enter the amount to refund the employee in the amount field.
11. Close the Payroll Transaction Entry window. When you are prompted, print the Payroll Transaction Audit report to verify that everything is correct.
12. If everything is correct on the Payroll Transaction Audit report, build the checks. To do this, follow these steps:
    1. On the Transactions menu, point to Payroll, and then click Build Checks.
    2. Specify a date range for the build in the Pay Period Date section.
    3. Click Include Deductions, select the None option, and then click OK.
    4. Click Include Benefits, select the None option, and then click OK.
    5. Click Select Batches, select the batch ID that you saved the transactions to in step 9, and then click OK.
    6. In the Build Payroll Checks window, click Build.
    7. Print the Build Check File report to verify that everything is correct and that there are no errors.
13. On the Transactions menu, point to Payroll, and then click Calculate Checks.
14. Click OK, and then print the Precheck Report to verify that everything is correct.
15. On the Transactions menu, point to Payroll, and then click Print Checks.
16. Click to select the Checks option, and then click Print to create the refund checks for the employees.
17. In the Post Payroll Checks window, click Process to post the checks. When you are prompted, print the posting journal reports and verify that nothing was updated other than the amount that the employee is being paid. All other deduction reports and tax reports should display $0.
18. Manually adjust the tax withholding amount and the taxable wage amount in the Payroll Manual Check-Adjustment Entry window. To do this, follow these steps:
    1. On the Transactions menu, point to Payroll, and then click Manual Checks.
    2. In the Check Type section, click to select the Manual Check option.
       
       Note Do not enter a batch ID for this transaction.
    3. In the Employee ID field, select the employee ID that you want to update, and then click Transactions.
    4. 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 field that corresponds to that tax type.
    5. In the Amount field, enter the over-withheld tax amount as a negative amount.
       
       
       Note This step reduces the tax withheld amount as necessary.
    6. In the Taxable Wages field, enter the taxable wages amount as a negative amount.
       
       
       Note This step reduces the taxable wages for the employee.
    7. Click Save, and then close the window.
    8. In the Payroll Manual Check-Adjustment Entry window, click Post.
    9. Repeat steps 18a to 18h for each employee to be adjusted.
19. Manually adjust the employee net wages in the Payroll Manual Check-Adjustment Entry window. To do this, follow these steps:
    1. On the Transactions menu, point to Payroll, and then click Manual Checks.
    2. In the Check Type section, click to select the Manual Check option.
       
       Note Do not enter a batch ID for this transaction.
    3. In the Employee ID field, select the employee ID that you want to update, and then click Transactions.
    4. In the Transaction Type list, select the pay code that has to be adjusted.
    5. In the Amount field, enter the amount that was refunded to the employee as a negative number.
    6. Click Save, and then close the window.
    7. In the Payroll Manual Check-Adjustment Entry window, click Post.
    8. Repeat steps 19a through 19g for each employee to be adjusted.