I pretty sure you want to take the gross back.  You paid them 1500 and deducted taxes.  You would have had to set up a code and put the $1500 into an account (and this would also be included in the W2 totals.  You need to do the repayment for the same amount or none of these accounts will balance back out to zero.

Then, when you take back the gross, it reduces the tax liability on the rest of the checks, making up the net difference. I think it about setting up the repayment code as a deduction before taxes so that it reduces the tax liability on the check(s) you take the repayment(s) on.  Maybe that is what is not working out correctly for you?

Yes, you are correct. It does need to take back the gross. It was taxing the full salary amount at month-end rather than the reduced amount. The solution was as you suggested, to take back the deduction before taxes in the repayment code set-up