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I have two employees that QB desktop payroll service is not withholding enough federal taxes. Every other employee is accurate, but two have a large tax underpayment from last year. Upon review, their federal withholding is roughly an average 2% and much smaller than state withholdings which obviously should not be the case. The payroll tax brackets are updated so it is not that. Also, under their personal payroll information, under employees, they have nothing that stands out and even have the same information as most of the employees who's taxes are being calculated correctly. How do I fix this? This seems to be a problem on the QB payroll service side.
I'm here to supply information about why federal taxes are calculated incorrectly from your employees' paychecks in QuickBooks Desktop (QBDT), @CraftDean . I'll also add some insights to fix this so you can process your payroll seamlessly.
I appreciate you for ensuring that you have the latest release of your tax table and that your QBDT is up-to-date. This way, you'll always have the latest features and fixes.
Moreover, it's good to know that you have reviewed your employees' profiles, as their federal income taxes are calculated based on the following factors:
Here are some articles that dig deeper into reviewing employees' details:
On the other hand, you can also check if the QBDT calculation is the same as the Online Paycheck Calculator. See this link for details: Paycheck Calculator for Hourly & Salary Pay.
If everything's accurate, let's use the verify and rebuild tool to see if this issue might be caused by data damage. It's a built-in tool that auto-detects and self-resolves minor company file data issues. Here's how:
If QuickBooks doesn't find any problems, select OK. You can keep using your company file. You don't have any data damage. However, choose Rebuild Now if QuickBooks finds an issue with your company file.
Please don’t hesitate to leave a comment if you have any other questions or concerns besides federal income tax calculation. I would be happy to help you more if needed. Goodbye for now!
Given a specific taxable amount, the only things that impact the the federal withholding amount are the details of the W-4 fields and the pay period. If those are correct, the the withholding will be correct. For most other taxes, like SS and Medicare, the pay period doesn't matter, only the taxable amount does.
If all the taxes are low, one thing that might be happening is that something is lowering the wage base for the taxes (except for federal withholding which uses the sum of amounts of various payroll items that have tax tracking types that impact federal withholding). Usually a deduction will do this, will reduce the wages, and it may or may not be appropriate for it to do that. Do these employees have any deductions that might be inappropriately reducing wages, where the others don't?
"Also, under their personal payroll information, under employees, they have nothing that stands out and even have the same information as most of the employees who's taxes are being calculated correctly. How do I fix this?"
Without providing the exact W-4 information, the employees wages, and the withholding amount, there's no way to know. The only way to know if the withholding is correct is to compare it to the withholding tables in IRS Publication 15-T. The withholding tables are what QB should be withholding regardless if it's enough or not. Use the worksheet on page 12. Or, provide the W-4 details (Step 1-4) and employees wages here. Dependents can make a big difference as does the checkbox in Step 2. This comes up often on this forum and I have yet to see QB's withholding be incorrect. You would be shocked at how little withholding some employees have after the 2020 From W-4 change.
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