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Level 2

Payroll tax calculations

The last payroll check we ran in 2018 (run on December 31) calculated FUTA incorrectly.  It calculated it as if none of the employees had yet met the $7000 threshold.  Why did this happen, and how do I fix it?  I did not notice it at the time, made the larger FUTA payment, and only caught it when preparing our annual 940 for 2018.

3 Comments 3
Not applicable

Payroll tax calculations

Hi there, Finaco,


I want to ensure you're able to correct your 940 payroll taxes in QuickBooks Desktop.


Incorrect tax calculations can be attributed by the following reasons:

There are a few steps we need to do to correct the FUTA overpayment. Let me guide you through the steps:


Step 1: Pull up a Payroll Detail Review report to get the amount for adjustment.

  1. Go to the Reports tab.
  2. Choose Employees & Payroll.
  3. Select Payroll Detail Review.
  4. Click the Customize Report button.
  5. On the Display tab, edit the date on the From and To fields based on the affected quarter. (Example: 01/01/2019-03/31/2019)
  6. Go to the Filters tab.
  7. On the filters click Payroll Item, and Choose Multiple payroll items on the drop-down.
  8. Click Federal Unemployment.
  9. Click OK twice.
  10. To get the correct amount, multiple the Wage Base by the FUTA rate. The difference should be the adjusted amount.
  11. Identify the employees you need to make adjustments.

Step 2: Create a Liability Adjustment.

  1. Go to the Employees menu.
  2. Select Payroll Taxes and Liabilities.
  3. Choose Adjust Payroll Liabilities.
  4. Select the correct Effective Date. It should be the last day of the affected quarter.
  5. Click the Employee radio button and select the correct employee to make the adjustment.
  6. On the Item Name column, choose Federal Unemployment.
  7. Enter a negative amount to reduce the liability.
  8. Click Accounts Affected and choose Do not affect accounts or Affect liability and expense accounts.
  9. If you have additional employees, click Next Adjustment and repeat the steps for each affected employee. 
  10. Once done click OK.

You may want to check this article for your reference when performing the steps: Adjust payroll liabilities


That should correct your liability, Finaco. You can now file your 940 form to IRS. Also, you'll need to get in touch directly with the IRS to get your refund options. In addition, there isn't an "X" form for the Form 940, if you already filed the form, you can continue using the Form 940 for amended returns.


Please let me know if you need further assistance, Finaco. I'll be glad to help you anytime. Have a good one!

Level 2

Payroll tax calculations

Thank you for the detailed response.


The problem is that the wage base SHOULD have been zero for almost everyone...HAD been zero for many week preceding, but all of the sudden, for this last 12/31 pay period, it was a positive amount.   

I need to adjust both the amount paid in FUTA, AND the wage base info so that my annual 940 generated by QB will be correct.

Not applicable

Payroll tax calculations

Hello, @Finaco.


Thanks for the response. I'm here to help how to correct this so you can generate your 940 with the right information.


Yes, you're correct, the deduction should automatically stop when the limit is reached. It's possible that the tax table is not updated, thus the incorrect tax calculation. You can fix this by creating a liability adjustment, just follow the steps provided by @Jen_D.


You'll need to adjust the wage base as well to zeroed out the amount. I've provided an example below.




This will get you on the right track. Let me know if you have additional questions. I'll be here to help.

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