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M
Mw72
September 12, 2024
Solved

FUTA

  • September 12, 2024
  • 2 replies
  • 9 views

I have selected Federal Unemployment on an employee's payroll information when our company does not do that. I have already paid the employee and ran it through quickbooks and now it shows that i have to pay the 940 Tax. I am wanting to fix that to where i don't have to pay the tax and repay the employee what is owed. 

    Best answer by FishingForAnswers

    Once I fix the Tax Liability adjustments will this also take away the Federal Unemployment notification that is due next month? 


    @Mw72  If done correctly, yes.

     

    The notifications of how much to pay are directly tied to the amount of payroll liabilities you have.

     

    The adjust liabilities function lowers (or raises) those liabilities.

    2 replies

    FishingForAnswers
    FishingForAnswers
    Level 4
    September 12, 2024

    @Mw72  There is no need to repay the employee regardless.

     

    Federal Unemployment is not a tax that is held out of the employee's paycheck. It will never affect the amount of the paycheck.

     

    It is a company contribution tax, no different than State Unemployment or the company share of Social Security or Medicare.

     

    The only impact it'll have on your books is making your balance sheet and such incorrect. That is as easy to fix as creating a payroll liability adjustment. This function can be found under the Employee menu, Payroll Taxes & Liabilities submenu.

      R
      RheaMaeHQuickBooks Team
      QuickBooks Team
      September 12, 2024

      Correcting your Federal Unemployment (FUTA) tax is my top priority, Mw72. Let's address this issue promptly.

       

      To begin with, let's correct the payroll information for the employee and remove the FUTA taxes by following these steps:

       

      1. Navigate Employees and select Payroll Center.
      2. Locate the employee's name and click the Edit icon.
      3. Click the Payroll Info tab and select Taxes.
      4. Uncheck the box next to Federal Unemployment (FUTA) (Company Paid) and click OK.

       

      Next, we'll generate a negative liability adjustment to offset the FUTA tax liability. Here's how:

       

      1. Click on Employees, and then select Payroll Taxes and Liabilities. 
      2. Choose Adjust Payroll Liabilities.
      3. In the Date and Effective Date, select the date of the last paycheck for the affected month or quarter.
      4. Click the Payroll Item column to choose the correct payroll item in the Taxes and Liabilities section.
      5. Under the Adjustment is for section, check the box for Company.
      6. Select Federal Unemployment in the Item Name column.
      7. Enter the negative amount of the adjustment.
      8. Click on Accounts Affected and choose Do not affect accounts.
      9. If you have additional employees, click Next Adjustment and repeat the steps for each affected employee. 

       

      FUTA taxes are paid by employers based on the wages they pay their employees and will not affect the amount of the employee's paycheck. For more information on FUTA tax, please refer to the article: Understand Federal Unemployment Tax Act (FUTA) Credit Reduction States.

       

      Additionally, here are helpful resources when preparing your tax forms:

       

       

      If you need more help correcting your FUTA taxes in QBDT or preparing your tax forms, please don't hesitate to contact us. We're always here and ready to assist you.

      M
      Mw72Author
      September 13, 2024

      Once I correct this in the tax adjustment, will this take away the payment liabilities for Federal Unemployment that say it is due next month? 

      S
      SheandLQuickBooks Team
      QuickBooks Team
      September 19, 2025

      Hi there, JFarias. Yes, you can create a negative amount to offset the incorrect liability amount that was applied to your employee.

       

      Before we proceed, since you mentioned that FUTA was incorrectly applied, please uncheck it from the employee's profile so the system won't calculate it in the future.

       

      Once done, follow these steps to adjust your payroll liability:

       

      1. Open the Employees menu and select Payroll Taxes and Liabilities.
      2. Click Adjust Payroll Liabilities.
      3. In the Liability Adjustment window, set Date and Effective Date to the last paycheck date of the affected month or quarter.
      4. In the Adjustment for section, select Employee and choose the employee's name from the dropdown.
      5. Once done, select the payroll item to adjust from the Item Name column.
      6. Then, enter the negative adjustment amount.
      7. Click Accounts Affected and then OK.
        • Select Do not affect accounts to leave liability and expense account balances unchanged.
        • Select Affect liability and expense accounts to update those accounts.
      8. Click OK to close the Affect Accounts window.
      9. Choose Next Adjustment to adjust another employee or OK to save and exit.

       

      For reference, please read this article: Adjust payroll liabilities in QuickBooks Desktop Payroll.

       

      On the other hand, if you’re using the Payroll Assisted service, manual adjustments can't be made. In that case, please contact our live support team for assistance.

       

      If you have other concerns, feel free to comment them below.

      J
      jfarias123
      September 29, 2025

      Hi there! I have received 2 different ways to process the adjustment. Can we verify which is accurate please? 

      1. In the Adjustment for section, select Employee and choose the employee's name from the dropdown.

       

      A previous QB team member in this thread stated to check off Company vs Employee

      1. Click Accounts Affected and then OK.
        • Select Do not affect accounts to leave liability and expense account balances unchanged.
        • Select Affect liability and expense accounts to update those accounts.

      A previous QB team member in this thread stated click on Accounts Affected and choose Do not affect Accounts

       

      Thank you for your help!

      JenoP
      JenoPQuickBooks Team
      QuickBooks Team
      September 29, 2025

      The adjustment choice depends on whether you need to fix individual employee records or just the company's overall ledger, jfarias123.

       

      Creating an Employee adjustment allows you to associate the correction to a particular employee. Meaning, it can either increase or decrease an amount in the employee's YTD. If you're only adjusting the total liability balance owed by the company, choose Company.

       

      When it comes to the Accounts Affected section, choose Do not affect accounts if you want it to increase or decrease the amount in the Pay Liabilities section. Meaning, it does not change any balances in your general ledger (payroll expense and payroll liability accounts), bank register, or any financial reports.

       

      For example, you're making the adjustment to change an amount in your payroll records, but your financial accounts are already correct.

       

      On the other hand, the Affect liability and expense accounts option updates the balances of both the payroll liability account on your Balance Sheet and the corresponding payroll expense account on your Profit and Loss report.

       

      You can specifically use this option if you over or underpaid a payroll tax. You can also use this if there's a calculation error that needs to be reflected in your company's financial statements. This will ensure your payroll reports and financial records are in sync.

       

      Check out this article for reference about this: Adjust payroll liabilities in QuickBooks Desktop Payroll.

       

      Don't hesitate to always ask for help if you need anything else.

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