USA Loans Receivables

[Sharing Smiles]

An employee lives in a city where there city tax changed so the overpaid. ADP helped us in refunding the employee through payroll. There is a debit in the Loans Receivable account that I need to clear for year end. What is the offset to clear this account?

 

[BIG E]

How could an employee withholding tax show up as a receivable?
The original journal entry should have been a liability of the withholding, then a washout once it was paid to the city.