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Handling negative paychecks caused by employee taxes

In certain circumstances, you may need to create a paycheck for an employee that only contains taxable payroll items like Third Party Sick Pay, Group Term Life Insurance (GTLI), Fringe Benefits or Tips. Since your employee is taxed on these payroll items, the paycheck you generate will result in a negative amount.

How to fix it
Depending on the circumstance, either the company or the employee must pay the taxes that caused this check to become negative.



  • To record repayment for the employee advance on future paychecks, refer to this article.
  • Zeroing out taxes/withholdings is usually unacceptable. Any employee tax/withholding outside of Federal and State withholding should never be adjusted. Federal and State withholding adjustments will affect the amount of Federal and State taxes the employee owes when filing their tax returns.
KB ID# SLN42084
3/30/2017 1:30:13 PM
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