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Adjust payroll liabilities in QuickBooks Desktop Payroll

SOLVEDby QuickBooks27Updated 1 month ago

Learn how to use a liability adjustment to correct employees’ year-to-date (YTD) or quarter-to-date (QTD) payroll info in QuickBooks Desktop Payroll.

When your payroll liabilities are incorrect, you can do a liability adjustment to fix them.

Here are the common reasons to make liability adjustments:

  • Fix a payroll item with the wrong tax tracking type
  • Correct YTD wages, taxes, and deduction items
  • Change the amount for company contribution items such as HSA or 401(k) company match

If you use QuickBooks Desktop Payroll Assisted, contact us if you need to make an adjustment for a previously filed tax form or payment.

Step 1: Find payroll discrepancies

  1. Run a payroll check-up (QuickBooks Desktop Basic, Standard, and Enhanced Payroll only).  If you need to run a payroll checkup for a previous year, you must change your computer's system date to the last day of that year.
  2. Run a payroll summary report for the month or quarter you need to adjust. Take note of the amount of Payroll Items that need adjustments.

Step 2: Adjust your payroll liabilities

  1. Go to Employees, then Payroll Taxes and Liabilities
  2. Select Adjust Payroll Liabilities.
  3. In the Date and Effective Date fields, select the last paycheck date of the affected month or quarter.
  4. In the Adjustment is for: section, select Employee Adjustment to correct your employee’s YTD info. Then select the employee's name. Do this even if the item being adjusted is a company-paid item.
  5. Under the Item Name column, select the payroll item you want to adjust.
  6. Enter the Amount of the adjustment. 
    • If the item is under-withheld, enter a positive amount to increase. 
    • If the item is over-withheld, enter a negative amount to decrease.
  7. Enter the amount under the Income Subject to Tax column if you need to make a wage base adjustment.
  8. Under Memo, enter a note about the adjustment for reference. 
  9. Select Accounts Affected, then OK.
    • Select 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.
    • Select Affect liability and expense accounts if you want the transaction to reflect in the liability and expense accounts.
  10. Select OK to close the Affect Accounts window.
  11. Select Next Adjustment if you have additional employees to enter an adjustment for. Otherwise, select OK to save the changes.

Step 3: Check if the liabilities are updated

  1. Run the payroll summary report again to check if everything is correct.
  2. Run the payroll liability balances report to check if the amounts to be paid are correct.

If your taxes are underpaid, check out Resolve a payroll tax underpayment. If it’s overpaid, check out Resolve a payroll tax overpayment to learn how to handle them.

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