Why do I have an overpayment?

The most common causes of tax overpayments and underpayments are:

  • Incorrectly entered tax rate; in particular, the state unemployment insurance (SUI) rate.
  • Paychecks added or deleted after the tax payment was approved for the payroll period.
  • Incorrect reconciliation of historical taxes
If an overpayment appears because of historical taxes
  • When you entered your prior tax payments, we noticed that you have overpaid your taxes so far this year.
    • If you still have at least one payroll to run in the same quarter, you don't need to do anything.
    • If the quarter with the overpayment is over, you need to resolve the overpayment.
  • You have entered your prior tax payments, but you have not yet entered tax information from your prior paychecks. (That is, you have told us about the taxes you have paid, but you have not yet told us about the tax liabilities you have incurred. Our system thinks you have overpaid your taxes.)

    Once you have entered your pay history, your tax liability will no longer be negative (unless you have in fact overpaid your taxes).

What to do with overpayments

Depending on the tax agency's requirements and your preference, you can resolve an overpayment by:

  • applying the overpayment to a future tax liability period, or;
  • marking the overpayment for a refund

Doing this tells us what you did with the overpayment amount, so we can properly track your tax payments and remove the tax payment reminder.

If you've already contacted the IRS or your state tax agency to take care of the overpayment, you can follow these instructions to record your actions in QuickBooks Online Payroll and to remove the tax payment reminder.

For federal tax overpayments
  1. In the left navigation bar, click Taxes > Payroll Tax. Then click Pay Taxes.
  2. Review the list of federal tax payments on the Pay Taxes page. An overpayment appears on the Pay Taxes page as a negative amount.
  3. For the overpayment, click Resolve Overpayment.
  4. Click what you want to do with the overpayment.
    • For federal withholding (941/944, including federal income tax, social security, and medicare), you can get a refund or apply the overpayment to the next tax period.
    • For federal unemployment (940, also known as FUTA), you can get a refund.
  5. Click Mark as resolved.
  6. Contact the IRS to get a refund or apply the overpayment to the next tax period.
For state tax overpayments

Resolve state unemployment insurance (SUI) overpayments

  1. In the left navigation bar, click Taxes > Payroll Tax. Then click Pay Taxes.
  2. Review the list of SUI payments on the Pay Taxes page. An overpayment appears on the Pay Taxes page as a negative amount.
  3. For the overpayment, click Resolve Overpayment.
  4. Click what you want to do with the overpayment. Depending on your state, you can get a refund or apply the overpayment to the next tax period.
  5. Click Mark as resolved.
  6. Contact your state's tax agency to get a refund or apply the overpayment to the next tax period.

Resolve state withholding tax overpayments

  1. In the left navigation bar, click Taxes > Payroll Tax. Then click Pay Taxes.
  2. Review the list of state withholding tax payments on the Pay Taxes page. An overpayment appears on the Pay Taxes page as a negative amount.
  3. For the overpayment, click Resolve Overpayment.
  4. Click what you want to do with the overpayment. Depending on your state, you can get a refund or apply the overpayment to the next tax period.
  5. Click Mark as resolved.
  6. Contact your state's tax agency to get a refund or apply the overpayment to the next tax period.

What to do with underpayments

You can usually resolve an underpayment yourself:

Still stuck? Contact us