Adjust Payroll liabilities to back out credit used

ekileen · ‎April 22, 2019

Kind of a long story, but need to be sure this is done correctly:

We overpaid our 941 liability in Q3 2018, so had a credit with the IRS.
The credit on our account was overstated in QB so the Q4 taxes were paid short. I have paid the amount owed and the IRS account is current, but need to get QB in line with the correct liabilities.

First - how do I adjust those liabilities to reflect the correct credit amount?

Second - how do I record the payment made directly at the EFTPS site in QB?

Third - how do I record the interest and penalties that were included with that payment?

Charies_M · ‎April 22, 2019

Hello there, ekileen.

Thanks for checking in with us. I want to make sure all your payroll concerns are taken care of.

For liability adjustments, I'll be sharing with you this article that will guide you through the whole process of making payroll liability adjustments in QuickBooks Desktop: Adjust payroll liabilities.

For your second question, you can use the Enter Prior Payments option if the liabilities were not entered in QuickBooks.

Here's how:

Go to the Help menu.
Then choose About QuickBooks. And press Ctrl+Alt+Y.
Choose the date range. Then select Next until you see the Create Payments button.
Under Item Name, select the drop-down arrow. And choose the item you need to create a prior payment for.
Verify the dates and update as necessary.
Select Next Payment to enter another prior payment.
Select Done.

To know more about this, here's a helpful article that you can refer to: Enter historical tax payments in Desktop payroll.

Lastly, you can record interest and penalties that were included with the payment by writing a check and entering the accounts (interest and penalties) under Expenses tab.

Here's how:

Go to Banking.
Click Write Checks.
From the Expenses column,
Click Add new to add the penalty account under the Account column. Do the same thing for interest.
Enter other necessary information.
Click Save and Close.

You should be all set. Be sure to keep in touch with me here should you have any additional payroll questions or concerns. I'm here to help.

View solution in original post

Charies_M · ‎April 22, 2019

Hello there, ekileen.

Thanks for checking in with us. I want to make sure all your payroll concerns are taken care of.

For liability adjustments, I'll be sharing with you this article that will guide you through the whole process of making payroll liability adjustments in QuickBooks Desktop: Adjust payroll liabilities.

For your second question, you can use the Enter Prior Payments option if the liabilities were not entered in QuickBooks.

Here's how:

Go to the Help menu.
Then choose About QuickBooks. And press Ctrl+Alt+Y.
Choose the date range. Then select Next until you see the Create Payments button.
Under Item Name, select the drop-down arrow. And choose the item you need to create a prior payment for.
Verify the dates and update as necessary.
Select Next Payment to enter another prior payment.
Select Done.

To know more about this, here's a helpful article that you can refer to: Enter historical tax payments in Desktop payroll.

Lastly, you can record interest and penalties that were included with the payment by writing a check and entering the accounts (interest and penalties) under Expenses tab.

Here's how:

Go to Banking.
Click Write Checks.
From the Expenses column,
Click Add new to add the penalty account under the Account column. Do the same thing for interest.
Enter other necessary information.
Click Save and Close.

You should be all set. Be sure to keep in touch with me here should you have any additional payroll questions or concerns. I'm here to help.

RhondaL · ‎May 13, 2020

Using this method, totally messed up my liabilities - now showing all the way back a year ago "overdue" on taxes!. PLUS changed my beginning balance for reconciling! So frustrating

RhondaL · ‎May 13, 2020

do not use this method. it was a huge mess for us

JessT · ‎May 13, 2020

Hi Rhonda,

It's really important to keep your bank accounts correct while doing adjustments in payroll. I can imagine what you've been through, and I want to help to prevent this from happening in the future.

First of all, it would be wiser to back up your company file if you'll do tax adjustments. This will give you peace of mind because you can just restore it when things go out of the way.

Secondly, liability checks and liability adjustments are saved in the Transactions tab in the Payroll section. Therefore, they are not hard to find if you need to edit or delete them when your books become incorrect.

With regard to tax adjustments, the steps above are right. However, when the amount is already reflected in the bank account, but not in payroll liabilities, don't affect your bank account in the adjustment. You can do that by clicking on Accounts Affected and selecting Affect liability accounts but not the bank account. That way, the adjustment will not affect your reconciliation as well.

As you enter adjustments in QuickBooks, you can run two the Payroll Summary and Payroll Liability Balances. These are the common reports that we check when we troubleshoot payroll tax discrepancies.

On the other hand, you can check out the QuickBooks Blog to see some content relevant to our situation today.

If you need help, you know how to reach us in the Community. We'll be happy to lend you a hand.

Carlyle

In case it helps others, here's what I did and it worked well. FOr this example, I'm going to pretend that our workers comp liability was $1000, and we had a credit of $200 with our workers comp company, and that we used this credit to pay $200 of the liability.

1. Go to pay the liability like usual.

2. When the check opens up, click on the "expenses" tab below the body of the check (to the left of the "payroll liabilities" tab).

3. On the top line of this tab enter "Accounts payable" under the account, put the amount of the credit that you have as a NEGATIVE number, enter something in the memo so you remember what you did, and put the vendor name where you have the credit in the "Customer: Job" field.

4. Adjust the amount of the liability check to reflect the amount of the credit you applied (in this case, the liability check will only net to $800, so I put $800 in the $ field on the check itself--don't change the amount on the payroll liabilities tab--that should still say $1000, and your expenses tab will say -$200, so the check is for $800). Save and close.

5. Open the "Pay bills" window, click on the vendor "bill" that you should now see there from the accounts payable expense you just created.

6. Click on the "Apply credits" button towards the middle bottom of the screen to apply the credits that you used to pay this portion of your liabilities.

7. Click Pay selected bills.

8. Have a dance party because you didn't have to make a confusing liability adjustment.

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Adjust Payroll liabilities to back out credit used