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ajm01998
Level 3

Federal tax withholding

I had an employee ask me why her federal taxes were withheld at a different rate on her last paycheck as compared to the prior one.  I am not able to answer her because I am not able to figure out myself how QuickBooks is calculating the federal tax withholding.  Is anyone able to reproduce the tax withholding calculation using a spreadsheet or similar?

5 Comments 5
Jen_D
Moderator

Federal tax withholding

It's great to see you here, @ajm01998.

 

I would like to share some insights on how to resolve this paycheck withholding discrepancy.

 

There are a few reasons why taxes won't calculate properly on the paychecks. Consider the following:

 

  • QuickBooks is not updated, or an internet interruption occurred during the update.
  • Using an incorrect tax table version.
  • Employee's Year-To-Date is incorrect.
  • QuickBooks is doing a catch up for an underpayment or overpayment.

 

To correct this, let's make sure you're able to download the latest tax table update version 22116. You can check that by following these steps:

 

  1. Go to the Employees tab.
  2. Select Get Payroll Updates.
  3. You'll see the tax table version beside the Payroll Update Info button.
  4. Click on Download Latest Update if the update version is not correct. An informational window appears when the download is complete.

 

Next, review the status of the Payroll if it is showing active in the company file. Here's how:

 

  1. Go to the Employees tab and select My Payroll Service.
  2. Pick Manage Service Key from the list.
  3. In the Status column, verify if it says Active.
  4. You can also view your subscription status by pressing Ctrl + K on your keyboard.
  5. If the status says Active, click the Edit button.
  6. Click Next.
  7. Uncheck the Open Payroll Setup - I want to start right tick box.
  8. Click Finish.

 

If it's correct, review any discrepancy on the employee's paycheck. We can use a Payroll Detail Review report to verify the taxes withheld and the difference. Here's how:

 

  1. Go to the Reports menu, and pick Employees & Payroll from the list.
  2. Select Payroll Detail Review.
  3. At the top of the report, click on Customize Report button.
  4. From the Display tab, select a date range from drop down list or fill out the From and To dates.
  5. Proceed to the Filters tab. Find Payroll Item from the list and tap Multiple payroll items. (See screenshot.)
  6. Select the taxes that are not calculating. (Example: Medicare CompanyMedicare EmployeeSocial Security Company and Social Security Employee).
  7. Once done, click OK twice.

 

On the report, review if the payroll checks have the correct deductions. You can get the correct calculation by multiplying the total wage base of each payroll item by the corresponding tax rate.

 

If QuickBooks did overwithheld any taxes, you can wait for the next payroll run for QuickBooks to auto-correct the calculations. Another option is creating a liability adjustment to correct the taxes. Here's an article with the complete steps on how to create an adjustment: Adjust payroll liabilities.

 

Once done, try to process the payroll again and see if the taxes withhold correctly. If not, I highly recommend contacting our Payroll Support this time to report the problem.

 

Here's how you can connect with us:

 

  1. Open QuickBooks.
  2. Go to Help, then select QuickBooks Desktop Help.
  3. Select Contact Us.
  4. Enter your concern, then select Continue.
  5. Choose a way to connect with us:
    • Post a question and get an answer from expert and other customers.
    • Start messaging with a support expert.
    • Get a callback from an expert (availability may be limited).

 

You can also chat our support online. Select your product and fill out the form to chat with an expert by clicking this link here: Do It Yourself Payroll Chat Support

 

If you need further help or have other questions with the payroll tax calculations in QuickBooks. Leave a comment below and I'll be glad to help. Have a productive week! Take care.

ajm01998
Level 3

Federal tax withholding

Thanks, but I'm not asking how to fix things.  I'm asking if anyone can explain how QuickBooks does the calculation.

DebSheenD
QuickBooks Team

Federal tax withholding

I've got you covered, ajm01998.

QuickBooks Payroll calculation depends on what information and transactions you entered. All items need to be set up correctly to avoid miscalculation.

For more information on how QuickBooks calculates payroll taxes, please see this article: Understand the Tax Amounts Reported.

In addition, you can use this paycheck calculator to see an estimate of the employee’s earnings for the pay period.

For future reference, I've included this article that'll help you view Payroll Details in QuickBooks: Customize payroll and employee reports.

I'm only a few clicks away if you need assistance with your payroll calculations. It's always my pleasure to help you out again.

ajm01998
Level 3

Federal tax withholding

Thank you, that's very helpful. Can you help me understand how QuickBooks handles one-off bonus payments that are not part of the regular biweekly payroll?  For example, if an employee gets an annual bonus mid-way through the year, how will this affect withholding?

AbegailS_
QuickBooks Team

Federal tax withholding

Thanks for posting here, @ajm01998.

 

Allow me to share some insights on how annual bonuses affect your withholding.

 

Once you've chosen the bonus payment method, you'll have to consider whether or not the bonus is taxable. The net pay on a bonus check might vary drastically depending on the taxes chosen and disbursed, as well as whether the bonus is on the same or separate check as normal payroll wages.

 

Bonus checks are subject to normal tax deductions, including state and federal taxes. However, they may be subject to supplement tax rates for federal and state withholding. 

 

 To create a bonus paycheck, follow these steps below:

  1. Begin creating payroll according to your regular process. If you use payroll schedules, create the bonus check as an unscheduled payroll to avoid date discrepancies in your next scheduled payroll.
  2. In the Earnings box of the Preview Paycheck window, click the Item Name drop-down arrow, select a bonus item and leave the Rate column blank.
  3. In the bottom right corner of the window, place a checkmark in the Enter net/Calculate gross box.
     Payroll, you must gross up the check manually.
  4. Enter the amount of the bonus in the Check Amount field under the Employee Summary section and hit the Tab key. 

 

You can also read through this article for more details: Create Bonus Paychecks In QuickBooks Desktop Payroll

 

Furthermore, in case you need to print your paychecks, check out this link for your reference: Print your paychecks in QuickBooks Desktop.

 

If you have other concerns or questions about bonuses and withholding QuickBooks, feel free to tag me in your reply. I’m only a post away from you. Have a good one!

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