Federal withholding not accurate

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:

1. Employee’s W-4
2. Pay frequency
3. Gross wages
4. Percentage or wage bracket method

Here are some articles that dig deeper into reviewing employees' details:

• Understand how your payroll taxes are calculated
• Troubleshoot paychecks calculating incorrectly
• Troubleshoot no income tax withheld from a paycheck

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:

1. Go to the File menu, hover over Utilities and click Rebuild Data.
2. On the QuickBooks Information window, select OK. Follow the on-screen steps to save a backup.
3. Let the tool repair your file. It may take some time. QuickBooks may seem stuck, but as long as you can move your mouse, the tool is working.
4. Once the tool finishes, tap OK.
5. Go to the File menu. Then hover over Utilities and pick Verify Data.
6. Let the tool check your file for data issues.

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?

@CraftDean  

"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.      

I am an employee who’s federal withholding was incorrect. Instead of the 11% that should be withheld, it took out roughly 4%. Now I owe $2,500 in taxes. I have no deductions, exemptions or withholding. I have no idea why it would be calculating my federal that way but I am very annoyed. I am married filing jointly and I had multiple jobs. But I don’t see how that would effect the amount of federal taxes owed. 

Thanks for joining the thread, Kristin. I can see how crucial it is to address and fix this immediately for you. I'll provide some significant insights so this can be sorted out.

First and foremost, it's essential to ensure the accuracy of your tax withholding. If you notice any discrepancies, it is best to reach out to your employer. This way, they can make the necessary adjustments.

Additionally, I'll be leaving these resources to give you more troubleshooting steps on what to do if payroll taxes aren't calculating:

• Troubleshoot paychecks calculating incorrectly
• Troubleshoot no income tax withheld from a paycheck

You're always welcome here if you have other queries in mind. I'll be around ready to assist you.

@KristinBee  RE: I am married filing jointly and I had multiple jobs. But I don’t see how that would effect the amount of federal taxes owed. 

That's probably exactly why it happened. Here's why:

Generally, if you earned money paid by two employers - say 50% from each - you will have far less withheld than if you earned the same money from one employer. This is because a person making 50% of what you make (which is what you'd look like to each employer's payroll) has a much smaller percentage of their income taxed, and likely in a lower tax bracket, than you would if you were paid the entire amount from one employer.

@KristinBee 

Did you use the Multiple Jobs Worksheet on page 3 of your W-4 to add additional withholding for one of your jobs?  That is key for taxpayers that have more than one job.  Without it, you will almost always have too little withheld as @BigRedConsulting mentioned.  The W-4 updated in 2020 made this easier than the pre-2020 version.     

@KristinBee I feel like I could have written this myself! I had the same thing - I'm listed as single, no exemptions, etc. 

My personal tax settings have remained the same in QBDT since I hired on in 2018. HOWEVER, the 2023 tax year was the first year I ended up owing taxes - all previous years I received a refund. And I'm thinking the same will happen for the 2024 tax year. 

I feel like QB isn't updating the tax tables correctly. Something's definitely way off.