Pretax Refund Workaround

A lot of clients at Connect were asking about how to process pretax refunds without reversing a large number of paychecks.  In order to adjust the deduction history, paychecks would have to be reversed. There's not really a way around that. 

However, we did just find a workaround that saved us a lot of time for an employee who was going to otherwise need 26 paychecks reversed. 

1. We created a paycode transaction type (checked only "is transactional") for our pretax refund. We prepared a check for the employee with nothing but the pretax refund on it.  This ensures the employee is taxed on the pretax refund.

2. We created a custom transaction type (checked only "is ER contribution" and "allow negative", optionally "show ER contribution on paycheck", W2 box 12, W2 label must be the same as the label on the deduction which is being refunded) for our pretax refund, named similarly to the corresponding refund paycode. 

3. We added the contribution to the employee's profile with the refund amount as the contribution. The negative amount would not save. 

4. Within time entry, the contribution was manually edited to make it a negative amount. The negative amount DID save!

5. We generated Q4 2023 in greenshades early to enable us to view the Get W2 Info Report. The W2 report allowed us to verify that the check was increasing the employee's box 1 wages by the refund amount, and decreasing the box 12 in the appropriate label by the refund amount.

This works if the box 12 label category is a category where employee and employer contributions are combined into one total.  A different ER contribution would be needed for every refund with a different W2 label.

We were quite excited this worked.  It's not perfect, but I wanted to share!  We are in Classic, but BOLD back office may have similar capabilities.