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Adjust payroll liabilities in QuickBooks Desktop Payroll

Learn how to use a liability adjustment to correct employees’ year-to-date (YTD) or quarter-to-date (QTD) payroll info in QuickBooks Desktop Payroll.

When your payroll liabilities are incorrect, you can use a liability adjustment to fix them.

Liability adjustments include company contributions, employee additions, and deductions.

Here are the common reasons we use liability adjustments:

  • Fix a payroll item or a company contribution item with the wrong tax tracking type
  • Correct YTD wages, deduction amounts, or addition amounts for an employee
  • Change the amount for company contribution items such as HSA or 401(k) company match

Adjusting payroll liabilities can be tricky. If you are unsure of what step to take, always consult an accountant/tax adviser for assistance.

If you use QuickBooks Desktop Payroll Assisted, and need to make an adjustment for a previously filed tax form or payment, contact us before making any changes.

Note: Not sure which payroll service you have? Here's how to find your payroll service.

Step 1: Find payroll discrepancies

  1. Run a payroll check-up.  If you need to run a payroll checkup for a previous year, you must change your computer's system date to the last day of that year.
  2. Run a payroll summary report for the month/quarter you need to adjust. Take note of the amount of the Payroll Items that need adjustments.

Step 2: Adjust your payroll liabilities

  1. Go to the Employees, select Payroll Taxes & Liabilities, then select Adjust Payroll Liabilities.
  2. In the Date and Effective Date fields, select the last paycheck date of the affected month or quarter.
  3. In the Adjustment is for, select:
    • Employee Adjustment if the item you’re adjusting is a company-paid item. This will update the YTD info reported in both federal and state forms. Then choose the employee's name. 
    • Company Adjustment to correct the balance from Payroll Center and Payroll Liability balances report.
  4. Under the Item Name column, select the payroll item you want to adjust.
  5. Next, enter the Amount of the adjustment. 
    • If the item is under-withheld, enter a positive amount to increase. 
    • If the item is over-withheld, enter a negative amount to decrease.
  6. For employee adjustments, if you need to make a wage base adjustment enter the amount under Income Subject to Tax column.
  7. Under Memo, enter a note about the adjustment for reference. 
  8. Select Accounts Affected, then select OK.
    • Select Do not affect accounts to leave balances unchanged for the liability and expense accounts. The adjustment will only change the year-to-date amounts on your payroll reports.
    • Select Affect liability and expense accounts to enter an adjusting transaction in the liability and expense accounts.
  9. Repeat for other employees if needed, then select OK.

Step 3: Check if the liabilities are updated

  1. Run the payroll summary report again to check if everything is correct.
  2. Run the payroll liability balances report to check if the amounts to be paid are correct.

Step 4: (Optional) Correct a previously paid payroll liability check

If you have paid the liability and need to make corrections, you can edit the liability check to reflect the change.

  1. Go to Banking, then select Use Register.
  2. Select the register you use for payroll, then OK.
  3. Right-click the Liability Check, and select Edit Liability Check.
  4. Update the amount under the Payroll Liabilities column, then select Recalculate.
  5. Select Save & Close, then Yes.