FUTA epay in credit reduction state

Yes, that's correct. When you're in a credit reduction state, the FUTA tax accrues at the normal rate, and you must pay it at the normal rate during the year. Then when you file you'll owe more money, which is then due.

This is likely because it is not always known if a state will have a credit reduction until late in the year and/or what the the credit reduction percentage will be until late in the year.

Yes. I need to know please how to add the additional amount to the

liability e-payment. The extra $ due for the credit reduction is not included

in the amount for the Federal 940 in the Pay Liabilities tab of the Payroll Center.

Thanks. All good. I made a liability adjust for the extra amount.

You should be able to click "adjust payroll liabilities" on the bottom and add the amount to epay. someone else can confirm.

How did you adjust the liabilities? I have the same issue with my 940 payment due to CA credit reduction. Thank you in advance for the help!

Adjusting liabilities for a 940 payment due to CA credit reduction involves reducing the federal unemployment tax liability by the amount of the credit reduction. Let me show you how to adjust payroll liabilities in QuickBooks Desktop Payroll (QBDT), fernandez.

Here's how:

1. Press the Employees menu at the top and choose Payroll Taxes and Liabilities.
2. Then, select Adjust Payroll Liabilities.
3. This will open a page where you can enter all the details about the adjustment.
4. Enter the correct date in the field box.
5. **Use the same date as the last paycheck of the affected quarter. Use today's date if you’re working on the current quarter.
6. **The Effective Date is used to calculate amounts on your 940 and 941 forms as well as the Payroll Liability Balances Report.
7. Next, tick the box for Employee and click the drop-down to select the worker’s name.
8. In the Taxes and Liabilities section, go to the Item name column and pick CA-Unemployment Company.
9. Put the figure to be adjusted in the Amount field.
10. Use the Memo field to note what happened to the transaction.
11. Press the Accounts Affected button and pick the appropriate option.
12. **Do not affect accounts to leave balances unchanged for the liability and expense accounts. The adjustment will only change the year-to-date amounts on your payroll reports.
13. **Affect liability and expense accounts to enter an adjusting transaction in the liability and expense accounts.
14. Click OK twice to keep the changes.

If you need further assistance, I recommend contacting the state agency and notifying them about the overpayment. They will guide how to appropriately address the situation and ensure your state tax compliance is handled correctly.

For future reference, this article wraps all the steps on how to handle overpayment in payroll liabilities: 

• Understand Federal Unemployment Tax Act (FUTA) Credit Reduction States.
• Adjust payroll liabilities in QuickBooks Desktop Payroll.

Feel free to return to the community forum if you have any more questions or encounter any issues with QuickBooks Desktop (QBDT). We're here to assist with explanations or troubleshooting. Don't hesitate to reach out again if you need further assistance.

Why does this affect CA?  Doesn't it just involve an additional 940 payment, which would be FUTA?

Let me provide some additional information about the FUTA credit reductions, @stephanie777.

The Federal Unemployment Tax Act (FUTA) credit reduction affects California because it is one of the states that has taken loans from the federal government and has not repaid them within the allowable time. As a result, employers in California are subject to a FUTA credit reduction of 0.6% for 2023, and employers are required to pay more in FUTA taxes that will be added to the appropriate line item when you file Form 940. 

You can refer to this article for more detailed information: Understand Federal Unemployment Tax Act (FUTA) Credit Reduction States.

Additionally, you can adjust your payroll liabilities to correct employees’ year-to-date (YTD) or quarter-to-date (QTD) payroll info in QuickBooks Desktop. 

You're always welcome to comment back if you have other questions about the FUTA credit reductions or other QuickBooks-related concerns. We'll be here ready to help you so you can process your taxes smoothly. Have a wonderful day!

How do we do this in QBonline?

You have to call QBO and they will do it for you. Very annoying I know. I had 12 clients to do, and I lucked out and got an expert who actually knew what she was doing and it only took like 25 minutes to do them all! I wish you luck.

P.S. I scheduled an appointment for them to call me through the chat, instead of waiting on hold.

I understand the importance of adding the amount to the Federal 940 payment, fernandez0924. I can route you to the best support available to ensure that everything is taken care of accordingly.

The option to adjust payroll tax liabilities isn't possible in QuickBooks Online Payroll. I suggest contacting our Payroll Correction Team to correct the amount.

Here's how to reach them:

1. Click the Help menu in the upper-right-hand corner.
2. Type in "Talk to a human", then press Enter.
3. Select Contact Support Team.
4. Type again Talk to a human and click Contact Support Team.
5. Choose a way to connect with us.

You might run payroll reports in QBO. This will allow you to view important information about your company, payroll taxes, and employees.

Please let me know if you need further assistance with your payroll adjustments. I'm always here to ensure your success. Take care always!

@JuliaMikkaelaQ , @stephanie777 was asking a different question.  It wasn't about the relationship b/w state and federal.  The question was how come your instructions specify adjusting a CA tax item, when the conversation is clearly about FUTA adjustments.  End of January is the worst time to have wrong information up - please review and edit your post, as Federal Unemployment is the item to be adjusted here.

Thanks in advance.

-Lx.