Refunding a pre-tax deduction

[gccc]

One of our employees recently cancelled his AFLAC insurance plan for which we had been taking out a pre-tax deduction in payroll through PCP V14. He had two payroll checks that were processed and deposited in his checking before I realized the policy was closed, so they both had the pre-tax deductions taken out. I'm not sure how to go about getting those deductions back to the employee. I assume I can't just write him a check for the total since they are pre-tax and need to be adjusted in PCP for W2 purposes, but realize I also can't just void the check and correct since he already cashed the original checks. Can you please tell me how to go about correcting this issue?

[NeilZ]

One of our employees recently cancelled his AFLAC insurance plan for which we had been taking out a pre-tax deduction in payroll through PCP V14. He had two payroll checks that were processed and deposited in his checking before I realized the policy was closed, so they both had the pre-tax deductions taken out. I'm not sure how to go about getting those deductions back to the employee. I assume I can't just write him a check for the total since they are pre-tax and need to be adjusted in PCP for W2 purposes, but realize I also can't just void the check and correct since he already cashed the original checks. Can you please tell me how to go about correcting this issue?

The best way to do this is as follows: I'm assuming that the funds went into a liability account, right? The funds were moved from the salary or expense account to the liability account, this is the normal way pre-tax deductions are handled. What I would do is adjust the first payroll check coming up to increase the salary for the amount that was deducted. This returns the funds to the employee, the proper taxes are deducted, and he receives the after tax proceeds.

On the Verify Payroll window when processing payroll, select the employee's name and click on PREVIEW. In the memo, I would definitely add some explanation to the transaction and add a note at the bottom something like "Returned deductions for cancelled insurance in salary' or something that would make sense to an auditor

[gccc]

You are correct that the funds went into a liability account when deducted.

That makes perfect sense to add it to the upcoming check for it to be taxed and add a note as to why. Thanks so much for your help!