Retainage Release Invoice – Incorrect Tax Inclusive Computation

We are encountering an issue with retainage release invoices. Based on the attached screenshot, when the retainage release is entered as tax inclusive, system is adding the computed tax on top of the retainage amount.

Example:

Retainage invoice amount = 3,500 (tax inclusive)
Tax calculated = 375
Distributions = 3,875 (3,500 + 375)
Variance = 375

Expected Behavior:
If the invoice is tax inclusive, the system should split the 3,500 into:

Base = 3,125
Tax = 375
Total = 3,500

What is the configuration required to handle tax inclusive retainage release invoices correctly?

Thank you.