@MEmerson2  Admittedly, the explanation I listed before was only my best guess as to how QuickBooks is set up to calculate the federal tax withholding. Your approach is the correct way to go about it, but in my experience, logic and QuickBooks' design choices rarely seem to keep company lately.

To your second question, that's an easier one.

If you click on the Lists menu at the top of the QuickBooks program, you'll see a Payroll Item List option.

Click on that, and it will open a window listing all of your different payroll items, which government office they are paid to and, more importantly, the tax rate they should be using to calculate their respective taxes.

Unfortunately, the behaviour I suggested would not reflect there. It's just the catch-up mechanism QuickBooks employs behind the scenes when things go wrong.

For instance, if the State Unemployment tax rate had not been updated for the first month or so of the year, but was then corrected, QuickBooks would offer to 'catch-up' or 'catch-down' the future Unemployment associated with each respective employee's future paychecks. This one is less problematic since it's a company contribution tax, not a tax that is held out of a paycheck.

If the rate was originally too high, it'll assign less or even no Unemployment tax until the wages reach a point where they align with the YTD Unemployment tax for that particular employee. Reverse the concept for if the rate was originally too low.

Medicare and Social Security will absolutely behave the same way if, for whatever reason, they weren't being calculated correctly earlier in the year. The displayed tax % won't change in the Payroll Item List, but they will still inflate (or deflate) their respective withholding amounts until the YTD Social Security tax is 6.2% of the YTD gross wages, and/or the YTD Medicare tax is 1.45% of the YTD gross wages.

Usually, these two taxes do not go wrong unless payroll hasn't been updated in a long time. After so many missed updates, QuickBooks has a habit of just turning off payroll tax calculation in general.