Federal withholding drastically changing from 2023 to 2024

Hey there, @leslie81639. 

It's great to see you back in the Community! I hate to hear that your employee is having concerns with their federal withholding. 

Based on the details you gave, I recommend contacting our Customer Support Team so they can take a further look into this issue. Here's how in the system: 

1. Go to the Help menu. 
2. Press the QuickBooks Desktop Help option. 
3. Tap the Contact Us button. 
4. Enter your concerns and hit Let's talk. 
5. Scroll down and choose to Get a callback. 

Please come back and let us know how the call goes. I'm only a post away if you have any other questions. Take care! 

I did try this but they were unable to help. 

@leslie81639 

It's difficult to say why the 2023 withholding was so much higher.  Did you use the proper hire date?  

At this point, I'm not sure why it matters.  In 2024, QB was withholding the proper amount based on the tax tables of IRS Pub. 15-T, correct?  That's all you can expect of a payroll system.  If your employee owes a significant amount in taxes, they must have more income or fewer deductions than their W-4 reflects.  They should look at their W-4 and adjust it appropriately. 

Can you share the employee's W4 info and salary/pay rate?  This is anonymous so no personal info obviously.      

For 2023- $90,000 salary

W4 is married filing jointly, $6,000 for qualifying children, no additional withholdings

box 2 not checked

For 2024 $97,000 salary

no changes to W4

I ran the worksheets from the IRS pub 15-T 2023 & 2024 worksheet both the bracket methods and the percentage methods. Here are my results below compared to what QB actually withheld.

2023

Bracket method- $29.00 

Percentage method $29.68

QB withheld $228.00

2024

Bracket method- $57

Percentage method $55.08

QB withheld $55

@leslie81639 

Is this for biweekly payroll?  If so, there doesn't seem to be any issue with how much QB is withholding.  If your employee owes "a lot" in taxes, it's clear there's a disconnect between their income ($97K) and W-4 information, and their actual tax return.

Here's the employee's 2024 projected tax liability based on income and W-4 information ($97K, MFJ, no multiple jobs, standard deduction, $6,000 in dependent credits):

-Salary = $97,000
-MFJ standard deduction = -$29,200
-Taxable income = $67,800 (97,000 - 29,200)
-Tax due on $67,800 = $7,672 (10% on first $23,200 and 12% on the remaining $44,600)
-Less qualifying dependent credits of $6,000 = Total tax owed = $1,672 ($64 biweekly or $32 weekly). 

If your employee is paid bi-weekly (26 pay periods) and had $55 withheld each paycheck, they had $1,430 withheld and would only owe $242 (1,672 - 1,430).  

We are semimonthly. I'm not really questioning the 2024. The IRS worksheet and the actual withheld amount in 2024 match its the 2023 that is in question. The issue may seem moot at this point but it's causing the employee as well as my boss to question QuickBooks dependability and wanting us to switch our entire accounting to different software. 

All in all though if you take $55 x24 pay periods =$1320 That is only 1.36% of the employees $97,000 which is NOT enough to not owe at the end of year. They need to change their W4 to have more withheld which is what we are working on. I do not understand why the worksheets differ so far from the proper withholding amount to not owe at the end of the year. 

@leslie81639  @Rainflurry  is already covering the math part quite well, so I'll stay out of that one.

I do want to chime in on the 2023 bit, though.

When you listed the salary amounts by year, was that the actual salary they earned, or was it the annual salary amount?

This is important for 2023 as you stated that they started halfway through the year; given the way QB calculates salary per pay period, that could mean that they had a higher annual salary in 2023 if they were actually paid $90,000 in six months, or it could mean that they only received approximately half of the proposed $90,000 salary for 2023.

They only received half but I did figure out the issue. The W4 was entered incorrectly in 2023 which cause a higher withholding amount in 2023.

@leslie81639 

"All in all though if you take $55 x24 pay periods =$1320 That is only 1.36% of the employees $97,000 which is NOT enough to not owe at the end of year."

Sure, but they shouldn't owe more than a few hundred dollars.  I know $1,320 doesn't sound like enough, but a MFJ filer with a $ 97,000 salary, taking the standard deduction, and $6,000 in dependent tax credits, only pays $1,672 in federal income tax in 2024. That number drops to $1,563 in 2025 because the standard deduction increased.  Yes, your employee only pays ~1.6% in federal income tax!  How's that for a favorable rate?  If you want to see the numbers, see the math in my previous post.    

If your employee is telling you that they owe a significant amount (more than $350 for 2024), then there's more to the story - either their MFJ income is more than $97K, or they aren't using the $6K in dependent tax credits.    

"I do not understand why the worksheets differ so far from the proper withholding amount to not owe at the end of the year."

When I work through the worksheets, it shows that your employee should have either $63 or $65 withheld each pay period, not $55.  $65 is exactly enough to cover their $1,563 in federal income tax in 2025.  Again, if they're telling you they owe more than ~$350, I think you aren't getting the whole story     

I would like to see how you got that # on the worksheet. Here is the worksheet I did. 

@leslie81639 

Ahh, I see the discrepancy.  The difference is that I used $4,042 ($97,000 / 24) for line 1a and you used $3,920.  $3,920 X 24 = $94,090.  For 2025, I get $65 per pay period and, in 2024, $69.40 per pay period.  Worksheets attached.