diff --git a/CHANGELOG.md b/CHANGELOG.md
index 2bede827..0d63dbc9 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,10 @@
 # Changelog
 
+## [0.8.6] 2024-09-11
+
+- Fix addOverlay bug on subfolders
+- Improve Windows code coverage
+
 ## [0.8.5] 2024-09-10a
 
 - Error with packaging subfolders on S3 overlay
diff --git a/plugins/nf-quilt/src/main/nextflow/quilt/QuiltObserver.groovy b/plugins/nf-quilt/src/main/nextflow/quilt/QuiltObserver.groovy
index ca022c84..903d200c 100644
--- a/plugins/nf-quilt/src/main/nextflow/quilt/QuiltObserver.groovy
+++ b/plugins/nf-quilt/src/main/nextflow/quilt/QuiltObserver.groovy
@@ -131,12 +131,23 @@ class QuiltObserver implements TraceObserver {
         }
     }
 
-    void addOverlay(String pkgKey, Path source) {
+    String pkgRelative(String pkgKey, Path dest) {
+        String destString = dest.toAbsolutePath().normalize()
+        // find pkgKey in destination.toString()
+        int index = destString.indexOf(pkgKey)
+        // return the portion after the end of pkgKey
+        if (index >= 0) {
+            return destString.substring(index + pkgKey.length() + 1)
+        }
+        return null
+    }
+
+    void addOverlay(String pkgKey, Path dest, Path source) {
         lock.lock()
         try {
             Map<String, Path> overlays = packageOverlays.get(pkgKey, [:]) as Map<String, Path>
             String relPath = workRelative(source)
-            log.debug("addOverlay[$relPath] = $source")
+            log.debug("addOverlay[$relPath] = dest:$dest <= source:$source")
             overlays[relPath] = source
             packageOverlays[pkgKey] = overlays
         } finally {
@@ -159,7 +170,7 @@ class QuiltObserver implements TraceObserver {
             log.debug("canOverlayPath: checking key[$key] for $dest")
             if (dest.toString().contains(key)) {
                 log.debug("canOverlayPath: matched key[$key] to $dest")
-                addOverlay(key, source)
+                addOverlay(key, dest, source)
                 return true
             }
         }
diff --git a/plugins/nf-quilt/src/test/nextflow/quilt/QuiltObserverTest.groovy b/plugins/nf-quilt/src/test/nextflow/quilt/QuiltObserverTest.groovy
index 728a1d98..d38ff011 100644
--- a/plugins/nf-quilt/src/test/nextflow/quilt/QuiltObserverTest.groovy
+++ b/plugins/nf-quilt/src/test/nextflow/quilt/QuiltObserverTest.groovy
@@ -20,6 +20,7 @@ import nextflow.quilt.QuiltSpecification
 import nextflow.quilt.QuiltObserver
 import nextflow.quilt.jep.QuiltPackage
 import nextflow.Session
+import spock.lang.Ignore
 
 import java.nio.file.Path
 import java.nio.file.Paths
@@ -95,6 +96,19 @@ class QuiltObserverTest extends QuiltSpecification {
         println('done')
     }
 
+    void 'should return pkgRelative path for dest'() {
+        given:
+        QuiltObserver observer = makeObserver()
+        expect:
+        Path dest = Paths.get(TEST_KEY, folderPath)
+        String relPath = observer.pkgRelative(offset, dest)
+        rc == (relPath == folderPath)
+        where:
+        rc    | offset | folderPath
+        true  | TEST_KEY | 'output/file.txt'
+        false | SPEC_KEY | 'output/file.txt'
+    }
+
     void 'should findOutputParams'() {
         given:
         QuiltObserver observer = makeObserver()
@@ -150,6 +164,21 @@ class QuiltObserverTest extends QuiltSpecification {
         false | 'output/not/a/key'
     }
 
+    /// source usually lacks subfolder paths
+    @Ignore
+    void 'should addOverlay dest path with subfolders'() {
+        given:
+        QuiltObserver observer = makeObserver()
+        Path dest = Paths.get('output/file.txt')
+        Path source = Paths.get('file.txt')
+        String targetKey = QuiltPackage.osConvert('bucket/prefix/suffix')
+        expect:
+        !observer.packageOverlays.containsKey(targetKey)
+        observer.addOverlay(targetKey, dest, source)
+        observer.packageOverlays.containsKey(targetKey)
+        observer.packageOverlays[targetKey].containsKey('output/file.txt')
+    }
+
     void 'should not error on onFlowComplete success'() {
         given:
         String quilt_uri = 'quilt+s3://bucket#package=prefix%2fsuffix'