Payroll Tax deductions

Pleased to have you here, @MEmerson2.

Thank you for dedicating time to search our Community for possible solutions. I'd be delighted to provide insights into the reasons behind the incorrect deduction of federal taxes in QuickBooks Desktop (QBDT).

Here are the possible reasons QuickBooks aren’t calculating federal taxes properly:

• Total annual salary exceeds the salary limit.
• The gross wages of the employees' last payroll are too low.

You can pull up Payroll Summary report or Payroll Detailed reports to check the calculation of one of the employee's paychecks to see if it matches QuickBooks. To help figure out the exact withholding amount, please go through the IRS 2018 Publication 15.

If the calculation is incorrect, you can create payroll liability adjustment. However, if it's correct let it be. 

Also, here are the lists of articles you can read more about paycheck calculation in QBDT:

• Payroll items on a paycheck are not calculating or are calculating incorrectly.
• QuickBooks Desktop calculates wages and/or payroll taxes incorrectly.

For future reference, we also have a variety of reports you can pull up in QuickBooks Online Payroll in case you need help checking up on your employees' data and other payroll-related concerns: Run payroll reports.

Reach out to me again if you have other payroll-related concerns or questions about QuickBooks. I'm always willing to assist you in making your business run smoothly. Have a wonderful day!

Hi,

Thank you for the informative response, but unfortunately all of those options either don’t apply or have been tried. I was on the phone today for 1 1/2hrs with payroll customer service, with no answers. Myself and our account both reviewed the withdrawals and our figures were both lower than what quickbooks is pulling when we calculated them. Unfortunately I don’t have a good explanation for these few employees who are complaining about all of the taxes that are being withdrawn. 

@MEmerson2  Do you have more specific details available? How much is actually being held out, and how much are they grossing?

Without more details, the only idea that comes to mind is to check if the '2 jobs' box is checked under their Federal Tax Withholding tab. That would cause the withholding to be higher than what would normally be calculated.

Hi,

Attached are the numbers from the employees most recent paycheck detail. They are paid weekly and the version we use for quickbooks is desktops (quickbooks tried to get us to switch to online and it was a disaster. Our employees have a pension and union dues and quickbooks online isn’t compatible, which we didn’t find out until after the fact) I’ll add an additional attachment of the deductions to another post since I can only add 1 at a time. 

Attached are how the federal withdrawal deductions are entered into quickbooks.

Thank you for trying to help!

Attached are how the federal deductions are entered in quickbooks. Thank you for your help!

Attached are a screenshot of how the employees federal deductions are entered in quickbooks. Thank you for your help!

Attached is a screenshot of how the employees federal deductions are entered into quickbooks.

 screenshot the how the federal deductions are entered in quickbooks 

Well, hm.

According to the IRS' website, the 2024 tax rate for Single people earning over $47,150 is 22%.

By my math, 22.88% is being withheld from that paycheck in Federal Withholding, which seems in line.

As far as I can tell, QuickBooks' approach to income tax calculation is fairly straightforward; they take the gross wages on the paycheck, multiply it by the number of expected pay periods (52 in your Weekly case), and project the yearly income that way.

Going by the pictures you provided, the projected yearly income for this person would be $82,477.20, if they earned this amount every week.

This is in excess of the $47,150.00 threshold for the 22% income tax rate the IRS listed for 2024, so in the context of the way they're calculating it, the federal income tax withholdings are in line with what would be expected for a Single person with no dependents.

That being said, I'm more concerned about the social security and medicare taxes you listed.

For W-2 employees, the social security tax held out of their paychecks should be 6.2% of their gross wages. That would normally be $98.34 for the picture you provided. Likewise, Medicare (normally) should be 1.45%, or $23.00 for the aforementioned picture. Your numbers are significantly higher than that.

Because of this, I am curious if you had issues earlier in the year with payroll taxes not being withheld from paychecks; that would cause the system to hold higher social security and medicare taxes, among others, in an attempt to correct the situation.

Thanks for looking into this. See I thought according to the tax table the employees federal deduction would be closers to $281 based off of the gross pay of $1586.

Thank you for bringing the other items to my attention and I’m going to bring that to our accountant to review. 
I’m not aware that there were any issues with the payroll taxes earlier in the year that it would be trying to compensate for. 
Do you happen to know where I would check in quickbooks desktop to see what the social security tax and Medicare is set at?

Im fairly new to QB and was not the original person who set everything up.

@MEmerson2  Admittedly, the explanation I listed before was only my best guess as to how QuickBooks is set up to calculate the federal tax withholding. Your approach is the correct way to go about it, but in my experience, logic and QuickBooks' design choices rarely seem to keep company lately.

To your second question, that's an easier one.

If you click on the Lists menu at the top of the QuickBooks program, you'll see a Payroll Item List option.

Click on that, and it will open a window listing all of your different payroll items, which government office they are paid to and, more importantly, the tax rate they should be using to calculate their respective taxes.

Unfortunately, the behaviour I suggested would not reflect there. It's just the catch-up mechanism QuickBooks employs behind the scenes when things go wrong.

For instance, if the State Unemployment tax rate had not been updated for the first month or so of the year, but was then corrected, QuickBooks would offer to 'catch-up' or 'catch-down' the future Unemployment associated with each respective employee's future paychecks. This one is less problematic since it's a company contribution tax, not a tax that is held out of a paycheck.

If the rate was originally too high, it'll assign less or even no Unemployment tax until the wages reach a point where they align with the YTD Unemployment tax for that particular employee. Reverse the concept for if the rate was originally too low.

Medicare and Social Security will absolutely behave the same way if, for whatever reason, they weren't being calculated correctly earlier in the year. The displayed tax % won't change in the Payroll Item List, but they will still inflate (or deflate) their respective withholding amounts until the YTD Social Security tax is 6.2% of the YTD gross wages, and/or the YTD Medicare tax is 1.45% of the YTD gross wages.

Usually, these two taxes do not go wrong unless payroll hasn't been updated in a long time. After so many missed updates, QuickBooks has a habit of just turning off payroll tax calculation in general.

Good to know! I will be looking at those payroll list items tomorrow. I know updates have been completed every time that they pop up when payroll is initiated, and we integrated QB time at the beginning of February so our payroll had to be up to date for that to sync (QB support has also remoted in multiple times) I am going to check with our account though as well and have him review. 
Thanks for taking the time to help with my question! Appreciate it