This applies to Australian and Canadian companies only, as Australia and Canada allow tax on retainage (called retention or holdback). If you want to release retainage and split it for payment but then put a portion of the retainage back on hold, you should pay the portion that has the retainage tax first.

Follow the steps outlined in Create a Partial Payment, but do not choose Distribute Tax in step 10. You want to keep all retainage tax on one of the sequence numbers and pay this portion first, putting the non-taxed retainage back on hold.

If you don't pay the taxed portion of the retainage and the retainage is put back on hold, when you release the retainage again in the future, you will most likely see an incorrect tax amount.