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Experienced Member

Changing employee tax status and adjusting taxable wages and tax

I was just notified that our minister was supposed to be set up as W-2 for Federal and a 1099 for Social Security and Medicare. How do I change him to that status and then make the necessary adjustments to his taxable wage and tax.

 

I am fairly new to QB so step y step instructions would be good. We are using Desktop premier 2017.

 

Thanks

 

5 Comments
Moderator

Re: Changing employee tax status and adjusting taxable wages and tax

Thanks for reaching out the Community, churchsecretary1.

 

You'll have to enter your minister as an employee and vendor in QuickBooks Desktop. Then, record the employee's paycheck by creating some payroll adjustments and write a check or bill for vendor's 1099 accounts.

 

To set the minister as an employee, please follow these steps:

  1. Open QuickBooks.
  2. Go to Employees and Employee Center.
  3. Click on the New Employee button.
  4. Enter the name of the minister in the Personal tab.
  5. In the Payroll Info section, click on the Taxes button.
  6. Set the Federal, State, and Other tabs for tax purposes.
  7. Select OK twice.

I've attached some screenshots for reference.

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Now, make a payroll liability adjustment to correct the employee's year-to-date. Know that all entered adjustments will show up on the Form W-2.

 

You can follow the detailed steps in this article to make an adjustment: Adjust payroll liabilities.

 

Then, let's also record him as a vendor:

  1. Go to the Vendors menu and choose Vendor Center.
  2. Click on the New Vendor button.
  3. Enter the minister's name.
  4. From the Tax Settings, mark to select the Vendor eligible for 1099 box.
  5. Choose OK.

The following articles will help you with creating checks and bills in QuickBooks:

I'm also linking some of our great resources that will walk you through in creating the 1099 and W-2 Forms: 

Let me know if you have any follow-up questions. I'll do everything I can to answer them. Wishing you a good one.

Experienced Member

Re: Changing employee tax status and adjusting taxable wages and tax

Jane, 

 

Thanks so much for the information. I am finally making the changes. I want to ensure I understand correctly. The minister already has a file in QB and has been paid all year. Instead of changing the current file to SS/Med exempt I need to set up a new hire? What is the reasoning behind that? 

 

Thanks again for your assistance

Churchsecretary1

QuickBooks Team

Re: Changing employee tax status and adjusting taxable wages and tax

You won’t need to create a new profile, churchsecretary1.


You’ll only want to update the payroll information of the employee. Then, well run Payroll Checkup to correct the wage base and to get the discrepancy amounts. Once we get them, we’ll create liability adjustments to correct the taxes of the employee. This will be our road map, and we’ll do these step by step.

 

By the way, in your original post, you mentioned about 1099. It's only for sub-contractors (Vendors in QuickBooks). Please clarify if you want to make the employee a 1099 vendor, or just retain him as an employee, but with corrected payroll information. What we'll do now is for the employee's record.


Before we start, please back up your company file to keep a copy of the original data. Then, update your tax table to make sure we get the right tax calculation.


First, open the employee’s profile and make the necessary changes in his payroll information.

  1. From the Employees menu, select Employee Center.
  2. Double-click the name of the employee to open his profile.
  3. Go to Payroll Info and click the Taxes button in the upper right hand corner.
  4. Make the necessary changes in the Federal, State, and Other sections.
  5. Click OK.

Second, run the Payroll Checkup. This will go through all your payroll data and we’ll ask you to correct any lacking information, or correct the wages if it detects discrepancies.

  1. From the Employees menu, choose My Payroll Service.
  2. Select Run Payroll Checkup.
  3. Click on Continue to go through all your payroll setup.
  4. When you reach the Data Review section, select Yes to this question: Would you like QuickBooks to help you check your payroll data, and click Continue. When it detects errors in the wages per quarter, you need to correct it per quarter. 
  5. Click the View errors button to see the discrepancy amounts.
  6. Take a screenshot of the report or print it.
  7. Click on Finish Later because you'll go back to this page after correcting the discrepancy though liability adjustment.

Third, create a liability adjustment.

  1. From the Employees menu, select Payroll Taxes and Liabilities.
  2. Choose Adjust Payroll Liabilities.
  3. The Effective Date should the last day of the affected quarter.
  4. Select Employee and choose the name in the discrepancy report.
  5. In the table select each tax name and enter their amounts in the field provided.
  6. (Optional) In the Memo field, enter a note about the adjustment for future reference.
  7. Select Accounts Affected.
  8. Choose either Affect liability and expense accounts.
  9. Select OK.

After this, you can go back to the Payroll Checkup window and continue checking the next quarter, and so on.

 

If there are other adjustments you need help with, feel free to go back to this thread. We’ll help you out.

Experienced Member

Re: Changing employee tax status and adjusting taxable wages and tax

I confirmed he should not receive a 1099 he will only receive a W-2 with no Soc/Med taxable wages or tax on it. 

 

 

 

QuickBooks Team

Re: Changing employee tax status and adjusting taxable wages and tax

Thank you for confirming the filling status of your employee, @churchsecretary1.

 

Let's ensure to add the minister as your employee. Also, tagged the employee's profile as Tax Exempt.

 

To set the employee as tax exempt, here's how:

  1. Go to the Employees menu.
  2. Choose Employee Center.
  3. Double click on the employee's name.
  4. Select the Payroll Info tab.
  5. Click on the Taxes button.
  6. Set the Federal and State tax as Do Not Withhold.
  7. Click Ok.

For additional information, you can read this article: Set up tax exempt employees.

 

Please let me know if you need anything else. Have a nice day!