Hi

We had withholded one employee for Texas state by mistake. If i refund that amount back to him through company check which Chart of accounts does it goes to? Please let me know.

decisionsupport

You shouldn't issue a refund. Taxes mistakenly withheld can be recovered by your employee at the time they file a tax return.

You should stop making payroll deductions for that state if you havent already done so.


here is a link to HR Block that answers your question from an employee's perspective.

http://www.hrblock.com/taxes/fast_fa...ing%20&cid=951

Veena1

Hi

thank you for your reply. Here i forgot to mention one thing when i say withheld(Our payroll dept didn't withheld that taxes but in his paycheck everymonth we have deducted towards withhoding tax but we didn't file taxes with that state)Now how to give him back that money.

decisionsupport

reduce the balance on the taxes payable account for texas and issue a check for that amount to your employee. I am not sure how you have your chart of accounts set up, but your entry would look something like this with an accompanying note as outlined below.

(Dr) Taxes Payable - Texas
(Cr) Cash

* To refund taxes mistakenly withheld from Mr. / Ms. XXXXXX

Veena1

Hi

Thanks you so much for the reply. I have one more question for payroll taxes.

The payroll company withheld SSN taxes by mistake and paid back to us. Now if i pay that employee under which a/c does it goes to?

decisionsupport

What account did you credit when you received the check from the payroll company?

Veena1

I credited in to Payroll Expenses: Social security tax (Expense)

decisionsupport

Ok, it seems the first two transactions were like this

1. (Dr) Payroll Expense
(Cr) Cash

2. (Dr) Cash
(Cr) Payroll Expense < ----- This is where you stand right now

At this point you have a liability to your employee for deduction from wages that should not have taken place. And, your cash balance is overstated. So you need to record a properly classified expense and reduce cash for that same amount by issuing a check. Again, I'm not sure how your chart of account looks like so you could have other expense categories related to wages. You're in a better position to make that determination, but generally your next entry would mimic the following.

(Dr) Salary Expense
(Cr) Cash

* To pay Mr. / Ms. XXXXXX for wages mistakenly withheld.


***** BE SURE TO GET A SECOND OPINION AS I AM NOT A 100% SURE *********

Veena1

Hi Thank you so much for the reply it really helps.

One more question we have to pay 2007 Quarterly Report (941 balance) to Internal Revenue Service. If i cut the check does it goes to payroll taxes payable?Let me know.

morgaine300

It gets debited to whatever account you put it into when you did the payroll. If you were putting your FIT and FICA into "payroll taxes payable" then there is where it will come back out of. Just make sure you debit those penalties into an expense account if you haven't already accrued them. :-)