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Adjust payroll liabilities

Learn how to use a liability adjustment to correct an employee's year-to-date (YTD) information contained in Payroll Items such as company contributions, employee addition, and deduction payroll items.

Before proceeding...
  • For Basic, Standard, or Enhanced Payroll users, run Payroll Checkup.
  • For Assisted Payroll users, contact us to complete these corrections or if you need to do an adjustment for payroll liabilities that affects payroll taxes.

    Assisted Payroll customers can't adjust payroll liabilities paid by their payroll service. Liability adjustments for company contributions, per employee, can cause errors to employee records if the adjustments are performed outside the quarter in which they occurred. For example, for a March 15 paycheck with an effective date of June 15, you must change the effective date to March 31 of that year.

  1. Create a Payroll Summary Report.
  2. Change the date range on your Payroll Summary Report to match the effective date on your liability adjustment. If you are doing an adjustment for the 1st quarter your report should have a From Date of 01/01 through 03/31.
  3. Note the amount on the Payroll Item that needs adjustment.
  4. Go to the Employees menu, then select Payroll Taxes and Liabilities > Adjust Payroll Liabilities.
  5. In the Date field, enter the date for which you are making the adjustment. QuickBooks prefills today's date, but you should enter the date that you want the adjustment to be effective. Otherwise, this item will not show up in the appropriate Payroll Summary Report.
  6. In the Effective Date field, enter the date that you want this adjustment to affect your liability balance. QuickBooks uses this date to calculate amounts on your Forms 940 and 941 and on the Payroll Liability Balances Report.
    • Basic, Standard, or Enhanced Payroll: It should be the same date as the last paycheck of the affected quarter or today's date if doing an adjustment that affects current quarter only.
    • Assisted Payroll:
      • For a previous quarter use the last day of the affected quarter.
      • For the current quarter use the same date as the last paycheck.
  7. Choose whether to associate this liability adjustment with the company or a specific employee.
  8. In the Taxes and Liabilities section, from the Item Name column drop-down, select the correct Payroll Item.
  9. In the Amount column, enter the amount of the adjustment.
    • To increase the amount owed, enter a positive number in the Amount field. If you chose to associate this adjustment with an employee, QuickBooks displays a message that you should create a paycheck instead.
    • To decrease the amount owed, enter a negative number in the Amount field.
  10. (Optional) In the Memo field, enter a note about the adjustment for future reference.
  11. Select Accounts Affected…. Choose either Do not affect accounts or Affect liability and expense accounts, then select OK.
  12. If you have additional employees, select Next Adjustment and repeat the steps for each affected employee. If there are no additional employees, select OK to save your entry.
  13. Review the Payroll Summary Report to verify that the totals are now correct.
  14. If you have Assisted Payroll, send a zero payroll to transmit your changes to the payroll service.
  15. If a Liability Check had already been created for the old payroll item, the Payroll Liability Balance Report shows a negative balance and the new item shows a positive balance as a result of the adjustment.

Adjust multiple liabilities at the same time

You can adjust more than 1 payroll liability at a time. The key thing to remember is which period you are adjusting for.

You can adjust more than 1 liability at a time during 1 liability adjustment transaction by selecting the Payroll Items in the Payroll Item column provided. You can use only 1 effective date for a liability adjustment. If you need to make adjustments for more than 1 period, then you must use a separate adjustment transaction for each period. Also make sure that the adjustments are correct by selecting the appropriate reports when finished.