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Level 1

Extra federal withholding works but current period federal tax not included QBO

QBO - The bookkeeper (consultant) who prepares the payroll for the employer of my wife has not been able to add $100.00 extra federal tax withholding to each bi-weekly payroll.  There is more than enough current gross earnings ($600 +/-) to allow such additional deduction.  It takes out the $100.00 fixed amount but not the federal income tax for the current period gross taxable wages.  She told me that a QB CPA told her it was because of the cap of the FUTA tax.  ????? This does not make any sense to me since FUTA is an employer paid tax and withholding is from the employee.  Unless the company settings are erroneously tied to FUTA limit ($7,000 per year), how can both current and extra not be working?  The explanation makes no logical sense.

 

Thank you

Solved
Best answer June 19, 2020

Best Answers
Highlighted
QuickBooks Team

Extra federal withholding works but current period federal tax not included QBO

Hi there, TY8689.

 

The calculation of federal income tax (FIT) withheld from employees' paychecks depends on their marital status, the number of withholding allowances (exemptions) they claim on Form W-4, pay frequency, and their projected annual income. It might be a flat tax rate, regardless of projected income. And, a graduated tax rate based on annual income, such as FIT. For additional information, you can check this article: Payroll 101.

 

Income taxes are computed and withheld on employee paychecks and are required by federal and state governments. See Taxes and rates: wage bases and limits for more information on calculation and rates.

 

I'd still suggest performing the steps provided by my colleague above. This way, you can review the setup of your wife's payroll. This is to ensure the accuracy of her FIT in the program.

 

Please check this article to see information about the new changes to the Federal W-4 and how to enter and print a W-4 for employees: What’s changing with the Federal W-4?.

 

Please know that you're always welcome to post if you have any other concerns. Wishing you and your business continued success.

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3 Comments
Highlighted
QuickBooks Team

Extra federal withholding works but current period federal tax not included QBO

I appreciate the detailed information you've provided, @TY8689.

 

There are some reasons why there is no income tax withheld from the employee's paycheck. Let me share them with you and help you from there.

 

Please know that Federal and State income tax is withheld in accordance with IRS Publication (Circular E). Since the paycheck doesn't withhold income tax, it may be caused by the following:

 

  • They are not meeting the taxable wage base. 
  • They were set to Do Not Withhold for federal and state income taxes in the employee setup.

Since your employee had enough gross earning for the additional deduction, let's check if your employee was set to Do Not Withhold. Here's how:

 

  1. Click Payroll from the left panel, then select Employees.
  2. Select the appropriate employee.
  3. On the Employees page, select the appropriate employee.
  4. Select Edit employee.
  5. In the What are employee's withholdings section, click the pencil icon to review the information.
  6. Check the Federal Filing Status.

I'm adding this article for more details: 0.00 or no income tax withheld from the paycheck.

 

You can also check out these articles for more information:

Please know you can continue to reach me here with any additional questions. Thanks for coming to the Community, wishing you continued success.

Highlighted
Level 1

Extra federal withholding works but current period federal tax not included QBO

Thanks Mark.

 

The problem of no current period withholding is that since my wife returned to work working less than she had been working where current period withholding would occur, her annualized wages on which QB calculates taxes was below the annual threshold for federal tax.  So I did a worksheet that projected all sources of taxable income (wages, two Schedule C businesses, IRA distributions, taxable portion of social security, etc) for the year, estimated total income tax, and used that amount to have fixed (Extra) amount withheld.  If and when she returns to full time, this may result in overwithholding but I'd rather err on the side of having too much withheld.

 

What is still troubling is that the bookkeeper was not able to figure this out (lower wages by $400 per 2 week period) and that assuming she is correct in understanding what QB Support told her, relied on that when both should have known that FUTA limits have NOTHING to do with individual federal income tax withholding.

 

Thanks again

 

Tom

Highlighted
QuickBooks Team

Extra federal withholding works but current period federal tax not included QBO

Hi there, TY8689.

 

The calculation of federal income tax (FIT) withheld from employees' paychecks depends on their marital status, the number of withholding allowances (exemptions) they claim on Form W-4, pay frequency, and their projected annual income. It might be a flat tax rate, regardless of projected income. And, a graduated tax rate based on annual income, such as FIT. For additional information, you can check this article: Payroll 101.

 

Income taxes are computed and withheld on employee paychecks and are required by federal and state governments. See Taxes and rates: wage bases and limits for more information on calculation and rates.

 

I'd still suggest performing the steps provided by my colleague above. This way, you can review the setup of your wife's payroll. This is to ensure the accuracy of her FIT in the program.

 

Please check this article to see information about the new changes to the Federal W-4 and how to enter and print a W-4 for employees: What’s changing with the Federal W-4?.

 

Please know that you're always welcome to post if you have any other concerns. Wishing you and your business continued success.

View solution in original post

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