Tax tracking error

You can fix this error by repairing the payroll item setup and then using the Adjust Payroll Liabilities tool to correct the underreported FICA wages and taxes.

Here’s how: 

1. Go to the top menu and select Lists, then choose Payroll Item List.
2. Locate the payroll item used for tips and double-click it.
3. Ensure that the item is mapped properly so that it is explicitly subject to Social Security and Medicare taxes. Save the changes.

Next, adjust payroll liabilities:

1. Open your QuickBooks Desktop company file.
2. Go to the Employees menu, then select Payroll Taxes and Liabilities.
3. Select Adjust Payroll Liabilities.
4. Add the necessary dates, then select Employee Adjustment.
5. Select the employee, then complete the taxes and liabilities field.
6. Select the Accounts Affected, then click OK.
7. Repeat for the other employees, then click OK.

After that, handle the employee’s withholding recovery by opening a standard regular paycheck creation screen for that employee. Add a deduction line item (or use an existing deduction/addition code) to safely deduct the missed employee portion so they reimburse the company for the missed tax.

Please note that you will need to reconcile Form 941 or 941-X afterward. Make sure you enter data for both the taxable wage base columns (e.g., Social Security/Medicare wages) and the tax amount items (Employee Social Security, Employee Medicare, Employer Social Security, Employer Medicare) so that both your quarterly liability balances and your Form 941 mapping align correctly.

For further guidance, check out this article: Adjust payroll liabilities in QuickBooks Desktop Payroll.

If you have any additional questions, please don’t hesitate to reach out. We're always here to assist you.