[PR] How to refund a Pretax Deduction

Create a Refund Pay Sequence:

• In Pay Period Control on the Pay Sequence tab, add a new pay sequence for the refund.

• It is recommended to process the refund in a separate pay sequence rather than the employee’s regular paycheck.

Adjust Deduction/Liability Settings (if needed):

• If any deduction or liability codes are set to calculate only on Pay Sequence 1, temporarily uncheck this option. You may recheck it after processing the correction or .01 timecard line.

Create a Penny Timecard Line:

• In PR Timecard Entry, create a timecard line for $0.01.

• If the deduction uses Method – Rate per Hour, enter 0.01 hours as well.

• Process and post the batch.

• Note: The penny line ensures tax routines calculate correctly, even if no other wages are present.

Apply the Refund in Employee Pay Sequence Control:

• Open PR Employee Pay Sequence Control and select the employee and pay sequence.

• Go to the Deductions tab.

• Use the Override option to enter the pretax refund as a negative amount using the same deduction code it was originally withheld from. Process the changes.

Tax Considerations:

• Federal tax can be reduced by the penny if you wish to avoid increasing the employee’s wages.

• After processing, the refunded amount should appear in the Subject and Eligible Wages for tax purposes, provided the employee has not reached any limits.

Troubleshooting:

• If a deduction or liability does not calculate, verify whether the “Calculate only on Pay Seq #1” option is checked in the PR Deductions/Liabilities form for the relevant code.