Federal and State with holdings dont match

Hello Hdd1997,

The Federal (line 2) and the State (line 17) withholdings are normally different. Retirement plans are also a factor for calculating these taxes. There are plans that will increase the state withholding part, but not the federal withholding amount or vice versa. This depends on the Tax Tracking type of a retirement item.

Let's have a sample using the 401k plan. We'll check it's tax tracking type and see what taxes they affect.

1. From the List menu, choose Payroll Item List.
2. Double click on the 401k plan.
3. Click Next till you reach the tax tracking type section. The page explains how the 401k will affect your forms.
   
4. Click Next to see the Taxes section and see which other items they affect. As shown below, the 401k will affect the federal and state withholding taxes.
   

On the other hand, I have thoughts that you're already aware of this difference and you're referring to Line 1 and Line 16 instead. If this is the case, you can run the Payroll checkup to correct the wage base and get the difference. Then, you can create a liability adjustment later on to correct the amounts.

Please be sure to back up your company file before running payroll checkup.

We're just around if you need more assistance with your W2 and W3 forms.