QuickBooks Desktop is calculating percent (%) based taxes such as Federal Unemployment (FUTA), Social Security, Medicare, State Unemployment Insurance (SUI) and State Disability Insurance (SDI) incorrectly. These tax amounts may appear on paycheck as:
- Tax amount shows $0.00.
- Tax amount collected is wrong (over or under collected).
- Tax item does not show at all on paycheck.
- Tax amount continues to collect after annual limit has been reached.
This is a general troubleshooting article that will help you determine the source of payroll tax calculation errors and provide steps on how to fix these errors
- If you have QuickBooks Desktop Payroll Assisted and you need to make correction on payroll taxes that Intuit files for you, call 1-888-712-9702 for support.
- Make sure to download most recent QuickBooks Desktop software release and Tax Table updates before creating any new paychecks in QuickBooks Desktop.
Payroll Wage and Tax calculations are derived from the payroll data and transactions you entered in QuickBooks Desktop. To ensure accurate calculation of wages and tax amounts, your employees and payroll items should be set up correctly.
It is a recommended practice to run payroll reports on regular basis to review your employee(s)' payroll data so you can catch mistakes before the tax filing season.
- See How QuickBooks Desktop calculate payroll taxes to understand why paycheck shows the tax amount as $0.00 or under collected. Having a 0 amount or a different amount than usual on a paycheck, does not always indicate erroneous calculation. More often than not, it is because QuickBooks Desktop is just working as designed. Sample scenarios: Federal and State Income Tax (FIT and SIT) calculations are based on the following:
- agency's wage and tax calculation table which is updated by the Tax Table.
- Pay Frequency, Filing Status, number of allowances.
- Gross Wages - creating paycheck with wages that has lesser or larger amount than what employee normally gets in a pay period.
Additional Medicare starts calculating on paycheck, only after the employee has reached $200,000.00 in wages for the current year.
- To fix a paycheck that has wrong tax calculation, see steps below:
- If the calculation error exists only on a specific paycheck, it may be due to an outdated tax table version. Do a tax table update before doing one of the following:
- Revert the paycheck if you are still in the process of creating the paycheck.
- Delete the paycheck if you have not issued it to the employee.
- Void the paycheck if you have already issued the paycheck. When recreating the paycheck, any difference in net amount can be adjusted on the next payroll.
Important: If you have QuickBooks Desktop Payroll Assisted or Basic, Standard, Enhanced with Direct Deposit, see Void Paycheck before voiding a paycheck that has been sent to Intuit for processing.
If your employee's quarter (qtd) or year to date (ytd) wage and/or tax information is wrong, see steps below
- You can view all of your active employees' taxes set up in an Employee Withholding Report. To create and use this report, see steps below:
- Select Reports > Employees and Payroll > Employee Withholding.
- Select Customize Report tab to select the columns you want to display.
- Under Display, select the items below then click OK to save your changes. You can select any item in the Display list, depending on what you want to display on your report.
- State Lived
- State Worked
- SDI (if applicable)
- Social Security
- Local Tax 1
- Verify that your employees are set up correctly for federal, state and local taxes.
- If you need to edit an employee, double-click the Employee's name to bring up the Employee Information window.
- Select the Payroll Info tab.
- Select the Taxes button on the right.
- Select the Federal, State and/or Other tab and ensure that employee is marked appropriately for taxes Subject to. If there is an error, edit the employee record.
IMPORTANT: Editing tax items that employee is subject to in the middle of the year, will not auto correct prior payrolls. Correcting employee's wage and tax amount for quarter or year to date will require manual adjustment. If you have QuickBooks Desktop Payroll Assisted, contact Assisted Payroll support for any wage and tax correction.
Verify the accuracy of taxes set up for each payroll item.
Tax tracking type used on payroll item determines the taxability of the item and how it reports on your tax forms. To view the tax tracking type assigned to your payroll items:
- From menu bar in QuickBooks Desktop, click Lists > Payroll Item List.
- Double click the payroll item and select next twice to view the Tax Tracking type selected and how it affects your payroll tax forms. Pay close attention to tax tracking types used on pre tax deductions. Example: If you have a Health Insurance deduction item that is pretax (Plan 125), QuickBooks Desktop will deduct the amount for this item before applying or calculating taxes.
- If you need to correct an error caused by wrong payroll item set up, see Correcting year to date on paycheck when the wrong tax tracking type was used. If you are unsure what tax tracking type to use, consult your accountant or the tax agency.
Verify the correct tax rates for each payroll item.
- Select Reports menu > Employees & Payroll > Payroll Detail Review.
- Go to Dates. Filter the report to the specific YTD or QTD you wanted to check on.
- Look at the amount column of your payroll item list and review accuracy of the rate assigned to each tax item.
- If the rate is incorrect, double click the tax item and select Next until you get to the rate window.
- Change the rate and select next until Finish. For incorrect SUI rate, see Change SUI rate.
- Identify if a payroll item has an annual wage base limit. Wage base limit is a cap on the earnings that are taxed. Run a Payroll Detail Review for the year if the limit was reached for a specific employee.
Note: Changing the SUI or SDI rate today, will not change amounts that have previously been calculated on paychecks, nor will QuickBooks Desktop automatically enter any adjustments as a result of changing the rate field. Correcting quarter or year to date tax amount will require manual adjustment.
If you have QuickBooks Desktop Payroll Assisted, contact Assisted Payroll support if you need to adjust payroll taxes that are filed by Intuit on your behalf.
If payroll items and employees are set up correctly yet you are unable to determine the cause of discrepancy, proceed with the steps below.
- Review your Payroll Data to locate the discrepancy and identify the source. There are 2 tools you can use in QuickBooks Desktop to research and locate discrepancies:
- Payroll Checkup is a diagnostic tool that walks you through review of employee records, payroll item set up and wage and tax amounts and suggests solution for each discrepancy that it identifies. For instructions, see Run a Payroll Checkup. Important: If you have QuickBooks Desktop Payroll Assisted, do not run the Payroll Checkup.
- Payroll Detail Review Report can help you identify the source of the discrepancy. This report lists all transactions that affect an employee's wages and tax amounts. You will be able to see paychecks, liability adjustments and/or year to date adjustments that were entered in QuickBooks Desktop for your employees.
- Fix employee's quarter or year to date tax and wage discrepancies by following the steps below.
- To correct quarter to date (QTD) or year to date (YTD) tax and wage discrepancies:
- If you used payroll checkup or payroll setup Data Review to identify the discrepancies: Print your payroll discrepancy report (from payroll checkup results). You will need this as reference. See example of employee's wage and tax Data Review discrepancy below.
- Enter manual liability adjustment for each tax item that has a discrepancy for each quarter affected. You will need to do this for each affected employee.
- For instructions, see Entering wage base and tax adjustment to correct employee's quarter (qtd) or year to date (ytd) total.
NOTE: To verify the tax data reported on a 941, see Comparing and Verifying the Taxes on a 941 Return with a Payroll Summary Report
- If you used payroll detail review report to locate discrepancy:
- Filter your report to display the affected employee.
- If the error is caused by a single transaction such as paycheck or liability adjustment, you can void and recreate transaction with correct information.
- Print your report. You will need this to reference when entering correcting adjustment for this employee.
- Enter manual liability adjustment for each tax item that has a discrepancy for each quarter affected. You will need to do this for each affected employee. For instructions, see Entering wage base and tax adjustment to correct employee's quarter (qtd) or year to date (ytd) total. Note: Changes to wage and tax data on tax form you have already filed may cause amendment. Consult your accountant if amendment is needed.
Note: If you have tried all the recommended steps in this article yet the calculation error persists, ensure that your do not have data damage to your company file. Run the Verify Data process to detect data damage and run Rebuild Data as necessary to correct.