Hi:

Generally tax is entirely paid by the employee so any adjustment to it should be looked after by the employee. The need to adjust tax would not be necessary. However, if you have made a mistake somewhere along the line and you have to pay it you can code it to an expense if you wish or to the tax payable account. This should not be necessary though. Income tax is ultimately an employee responsibility unless you as an employer did not remit it on behalf of the employee.
By the way my account shows bank for the tax adjustment.
Hope this helps!

The Petty Cash Account is generally the first account in the Chart of Accounts (unless user modified) and as such is used as a default account when there is not another more logical account to use. As Randy mentioned Income Tax is totally paid for by the employee and should not require adjustments but the provision is built into the program. You can change the Petty Cash Account to an other account if you wish.