Payroll Item Shows New Liability Even though it has been INACTIVE Many Months

I'd be glad to help you clear out the liability, NNeese.

Taxes with positive balances will still show up in the Pay Liabilities window even if they are made inactive. You can temporarily make it active again so you can make the adjustment. Then, inactivate it again once the amount is removed. Here's how: 

1. Go to the List menu and select Payroll Item List.
2. Check the box for Include inactive the bottom part of the page.
3. Look for Federal Unemployment and click the X mark button beside it.

Once done, create a negative liability adjustment to zero out the amount. Here's an article about this in case you need an extra guide: Adjust Payroll Liabilities in QuickBooks Desktop.

After the amount is removed, make sure to go back to the Payroll Item List and make it inactive again.

You also need to make sure that none of the employees are subject is subject to FUTA so QuickBooks will no longer calculate it. You can go to the employee's profile and uncheck FUTA in the State tab. You can use this article as a guide: Set up Tax Exempt Employees.

Feel free to check out these articles in case you need more help when running payroll reports:

• Create a Payroll Summary Report 
• Customize Payroll and Employee Reports 

Don't hesitate to ask follow-up questions if you need more help from us. I'd be glad to jump right back and guide you again.

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@NNeese wrote:

RE: Why would an inactive payroll item pull in liabilities without being reset ACTIVE? 

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Making a payroll item inactive just hides it on the list. It doesn't mean it won't be used. It's the same with any other list record in QuickBooks, like an account on the chart of accounts or a name on the customer or vendor list.

To prevent Federal Unemployment from calculating and being reported on payroll forms, remove the tax from each employee by de-selecting it on the Federal Tax tab:

If yo set up the default employee to not include the tax, then new employees will not have it selected by default. Otherwise, they will. Start on the QB menu at Edit | Preferences to do this: