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Troubleshoot Part 2 on Form 940 in QuickBooks Desktop Payroll Enhanced

SOLVEDby QuickBooksQuickBooks Desktop Payroll2Updated December 01, 2022

Learn how to fix a common error you may get when you prepare Form 940 in QuickBooks.

When you select Check for Errors on your 940 form, you may get the following error: Total of this column doesn’t equal the exempt payments total. The difference is [amount]. You must make the necessary adjustments to reconcile the amounts. 

This means there’s an issue in Part 2: Determine your FUTA tax before adjustments

We’ll help you understand what causes this error and how to fix it.

Step 1: Understand the reason for the error

You likely have a payroll item listed below that is typically exempt from Federal Unemployment, but was set up in QuickBooks to calculate it. 

  • Fringe benefits 
  • Group Term Life Insurance (GTLI)
  • Retirement plans
  • Dependent care

Step 2: Fix the payroll item

In this step, you’ll need to fix the tax tracking type or Federal Unemployment tax on the payroll item that should be exempt from FUTA. 

  1. Select Lists, select Payroll Item List.
  2. Right-click the payroll item, and select Edit Payroll Item.
  3. Select Next until you get to Tax Tracking Type.
  4. Make sure the tax tracking type selected matches the payroll item used. Don’t use tax tracking type Other
    • If the tax tracking type is correct, go to Step 5. 
    • If the tax tracking type is incorrect, select the correct one, then select Next twice, then Finish. Go to the next section in this article Step 3: Fix your employee wages
  5. Select Next
  6. From the Taxes window, review the Federal Unemployment tax. 
    • If Federal Unemployment is unchecked, check it
    • If Federal Unemployment is checked, uncheck it 
  7. Select Next, then Finish

Step 3: Fix your employee wages

In this step, you’ll fix the FUTA wages for each employee that had the incorrect payroll item used on paychecks. 

  1. Create and save a backup of your company file.
  2. Run a payroll checkup.

If the payroll checkup doesn’t work, you’ll need to create manual wage base adjustments for each employee that had the incorrect payroll item.

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