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    QuickBooks calculates wages and/or payroll taxes incorrectly

    Article ID: 1000162

    Problem

    QuickBooks is calculating percent (%) based taxes such as Federal Unemployment (FUTA), Social Security, Medicare, State Unemployment Insurance (SUI) and State Disability Insurance (SDI) incorrectly. These tax amounts may appear on paycheck as:

    • Tax amount shows $0.00.
    • Tax amount collected is wrong (over or under collected).
    • Tax item does not show at all on paycheck.
    • Tax amount continues to collect after annual limit has been reached.

    This is a general troubleshooting article that will help you determine the source of payroll tax calculation errors and provide steps on how to fix these errors

    Details

    • If you have Assisted Payroll and you need to make correction on payroll taxes that Intuit files for you, call 1-888-712-9702 for support.
    • Make sure to download most recent QuickBooks software release and Tax Table updates before creating any new paychecks in QuickBooks.

    Payroll Wage and Tax calculations are derived from the payroll data and transactions you entered in QuickBooks. To ensure accurate calculation of wages and tax amounts, your employees and payroll items should be set up correctly.

    It is a recommended practice to run payroll reports on regular basis to review your employee(s)' payroll data so you can catch mistakes before the tax filing season.

    If the tax calculation error exists only on a specific paycheck:

    See below to learn how QuickBooks calculate payroll taxes. This may explain why paycheck shows the tax amount as $0.00 or under collected.

    The most common questions on tax calculations can be explained in this article, How QuickBooks calculate payroll taxes.

    Having a 0 amount or a different amount than usual on a paycheck, does not always indicate erroneous calculation. More often than not, it is because QuickBooks is just working as designed. Below are some example scenarios:

    Federal and State Income Tax (FIT and SIT) calculations are based on the following:
    • agency's wage and tax calculation table which is updated by the Tax Table.
    • amounts collected are also affected by filing status, number of allowances
    • changes in pay frequency (creating extra paycheck outside of normal pay schedule)
    • creating paycheck with wages that has lesser or larger amount than what employee normally gets in a pay period
    Additional Medicare starts calculating on paycheck, only after the employee has reached $200,000.00 in wages for the current year.

    To fix a paycheck that has wrong tax calculation, see steps below:

    If the calculation error exists only on a specific paycheck, it maybe due to an outdated tax table version.
    Do a tax table update before doing one of the following:
    • Revert the paycheck if you are still in the process of creating the paycheck.
    • Delete the paycheck if you have not issued it to the employee.
    • Void the paycheck if you have already issued the paycheck. When recreating the paycheck, any difference in net amount can be adjusted on next payroll.
    Important: If you have Assisted Payroll or Basic, Standard, Enhanced with Direct Deposit, see Void Paycheck before voiding a paycheck that has been sent to Intuit for processing.

    If your employee's quarter (qtd) or year to date (ytd) wage and/or tax information is wrong, see steps below

    Verify accuracy of taxes setup in the employee profile. See steps below:

    You can view all of your active employees' tax set up in an Employee Withholding Report. To create and use this report, see steps below:
    1. Click Reports > Employees and Payroll > Employee Withholding.
    2. Click Customize Report tab to select the columns you want to display.
    3. Under Display, select the items below then click OK to save your changes.
      You can select any item in the Display list, depending on what you want to display on your report.

      • Employee
      • State Lived
      • State Worked
      • SUI
      • SDI (if applicable)
      • Social Security
      • Medicare
      • FUTA
      • Local Tax 1
    4. Verify that your employees' are set up correctly for federal, state and local taxes.
    5. If you need to edit an employee, double-click the Employee's name to bring up the Employee Information window.
    6. Click the Change Tabs drop-down arrow and select Payroll and Compensation Info. QuickBooks 2013 and higher: Click Payroll Info tab.
    7. Click the Taxes button on the right.
    8. Click the Federal, State and/or Other tab and ensure that employee is marked appropriately for taxes Subject to. If there is an error, edit the employee record.

      IMPORTANT: Editing tax items that employee is subject to in the middle of the year, will not auto correct prior payrolls. Correcting employee's wage and tax amount for quarter or year to date will require manual adjustment.

      If you have Assisted Payroll, contact Assisted Payroll support for any wage and tax correction.

    Verify the taxes settings for payroll items used on your employees' paychecks. See instructions below:

    Tax tracking type used on payroll item determines the taxability of the item and how it reports on your tax forms. To view the tax tracking type assigned to your payroll items:
    1. From menu bar in QuickBooks, click Lists > Payroll Item List.
    2. Double click the payroll item and click next twice to view the Tax Tracking type selected and how it affects your payroll tax forms.
      Pay close attention to tax tracking types used on pre tax deductions. Example: If you have a Health Insurance deduction item that is pre tax (Plan 125), QuickBooks will deduct the amount for this item before applying or calculating taxes.
    If you need to correct an error caused by wrong payroll item set up, see Correcting year to date on paycheck when the wrong tax tracking type was used.
    If you are unsure what tax tracking type to use, consult your accountant or the tax agency.

    Verify from payroll item list that your tax items have the correct tax rates.

    1. Look at the amount column of your payroll item list and review accuracy of the rate assigned to each tax item.
    2. If the rate is incorrect, double click the tax item and click Next until you get to the rate window.
    3. Change the rate and click next until Finish. For incorrect SUI rate, see Change SUI rate.
    Note: Changing the SUI or SDI rate today, will not change amounts that have previously been calculated on paychecks, nor will QuickBooks automatically enter any adjustments as a result of changing the rate field. Correcting quarter or year to date tax amount will require manual adjustment.

    If you have Assisted Payroll, contact Assisted Payroll support if you need to adjust payroll taxes that are filed by Intuit on your behalf.

    If payroll items and employees are set up correctly yet you are unable to determine the cause of discrepancy, proceed with steps below.

    Review your Payroll Data to locate the dicrepancy and identify the source:

    There are the 2 tools you can use in QuickBooks to research and locate discrepancies:
    • Payroll Checkup is a diagnostic tool that walks you through review of employee records, payroll item set up and wage and tax amounts and suggests solution for each discrepancy that it identifies. For instructions, see Run a Payroll Checkup.

      Important: If you have Assisted Payroll do not run the Payroll Checkup.
    • Payroll Detail Review Report can help you identify the source of the discrepancy. This report lists all transactions that affect an employees' wages and tax amounts. You will be able to see paychecks, liability adjustments and/or year to date adjustments that were entered in QuickBooks for your employees. To create this report, see Payroll Detail Review report.

    Fix employee's quarter or year to date tax and wage discrepancies by following the steps below:

    To correct quarter to date(QTD) or year to date (YTD) tax and wage discrepancies:
    • If you used payroll checkup or payroll setup Data Review to identify the discrepancies:
      1. Print your payroll discrepancy report (from payroll checkup results). You will need this as reference.
        See example of employee's wage and tax Data Review discrepancy below.


      2. Enter manual liability adjustment for each tax item that has a discrepancy for each quarter affected. You will need to do this for each affected employee.
      3. For instructions, see Entering wage base and tax adjustment to correct employee's quarter (qtd) or year to date (ytd) total.
      To verify the tax data reported on a 941, see Comparing and Verifying the Taxes on a 941 Return with a Payroll Summary Report
    • If you used payroll detail review report to locate discrepancy:
      1. Filter your report to display the affected employee.
      2. If the error is caused by a single transaction such as paycheck or liability adjustment, you can void and recreate transaction with correct information.
      3. Print your report. You will need this to reference when entering correcting adjustment for this employee.
      4. Enter manual liability adjustment for each tax item that has a discrepancy for each quarter affected. You will need to do this for each affected employee. For instructions, see Entering wage base and tax adjustment to correct employee's quarter (qtd) or year to date (ytd) total.

        Note: Changes to wage and tax data on tax form you have already filed may cause amendment. Consult your accountant if amendment is needed.
    If you have tried all the recommended steps in this article yet the calculation error persists, try Verify Data in case you have a data integrity issue that is causing the error.

    25 comments

    Jo Ann5/29/2013

    10

    This is exactly what I needed. Thanks.

    Reply

    Mary2/15/2013

    The social security calculation stays the same no matter what the gross pay amount is. I am calculating it manually at this point. I'm assuming that this is a problem with the new update from Quickbooks. It was working fine prior to that. Hope you fix it soon.

    Reply

    Kriz2/22/2013

    01

    Hi Mary,

    I'm an Intuit employee and saw your comment. If all other taxes are calculating correctly except for Social Security, then QuickBooks may enter correcting adjustment amounts for employees that were under or over collected Social Security tax from previous paychecks. The article How QuickBooks calculates payroll taxes and how you can verify tax calculations discusses in details how QuickBooks auto adjusts taxes.

    I hope this helps. Thank you for posting a comment!

    PAT3/12/2013

    We have a client that wants to pay a one time bonus to an employee upon hiring - fed w/h seems high is there special treatment for this type of bonus?

    Reply

    Kriz3/25/2013

    01

    Hi Pat,

    I found a better article that will help you with withholding calculation for a bonus check. The article Creating bonus paychecks for QuickBooks Payroll provides different method of paying an employee bonus.

    I hope this helps! Thank you for the comment.

    Mike3/22/2013

    This is a huge issue. I have an employee who's paycheck is consistently off on social security. Today, it's $228 out of a $297 paycheck.

    Reply

    Melody4/4/2013

    Hi Mike,

    It might be that QuickBooks is doing auto correction that is the reason why the calculation of Social Security is off. The article How QuickBooks calculates payroll taxes and how you can verify tax calculations discusses in details how QuickBooks auto adjusts taxes.

    I hope this helps! Thank you for your comment.

    Sandra3/27/2013

    The last update to payroll with tax table 21308 did not load completely and payroll was done (1 employee only), but no taxes were withheld (other than local city tax). She did not have anyone to ask for help and needed her paycheck so did not try to correct the problem at the time. The update has now loaded successfully and is withholding, but now I must create her next paycheck (March 29th, 2013) and correct for the under-withholding for her and the employer. Social Security and Medicare seem to be adjust on their own to compensate for the under-withholding. Is it okay if I manually change Federal and State from within the paycheck prior to printing? My plan is to create the exact check she had last pay period to see what the taxes should have been and then adjust the next check by those amount.

    Reply

    Violet3/29/2013

    Hi Sandra,

    If QuickBooks is auto adjusting the % based taxes and you are just concerned about the FIT and SIT, yes, you can change the FIT and SIT amounts manually in the paycheck detail.

    Thank you for posting your comment.

    Jerry4/4/2013

    We got a new computer with Windows 8 and now Quickbooks is not withholding any taxes.

    I updated payroll and we are on Quickbooks 2013.

    Reply

    Dale4/4/2013

    Hi Jerry,

    This article will provide you details why taxes are not calculating: How QuickBooks calculates payroll taxes and how you can verify tax calculations

    Hope that helps. Thanks for posting a comment.

    Pam 4/4/2013

    Quickbooks is calculating and deducting employee medicare and social security from all employees except those that are salary. Can you explain?

    Reply

    Dale4/4/2013

    Hi Pam,

    Quickbooks will calculate the tax in which the employee is subject to. If it did not calculate the tax, possibility is that the employee has reached the annual limit or the employee was not subject to that tax at all.

    This article will provide you details about the limit:

    Taxes and rates: wage bases and limits

    Hope that helps. Thanks for posting a comment.

    Delora4/5/2013

    Our unemployment insurance tax rate for 2013 changed from .61% to .54%. I failed to go in and change the rate in January, so the calculations are off on the payroll summary for the two employees that we have. I discovered the error when I was online to submit the Quarterly State Unemployment Insurance report (Texas Workforce Commission). The amount of taxes that QuickBooks says we owe is $87.84 and we actually owe $77.76, so the total adjustment is $10.08, with one employee needing an adjustment of $3.78 and the other employee needing an adjustment of $6.30. How do I go about correcting this error and making these adjustments so that the balance on the transactions by payroll liability item report for "Unemployment-Company" will be zero.

    Reply

    Dale4/5/2013

    Hi Delora,

    This article Entering wage base and tax adjustment to correct employee's quarter (qtd) or year to date (ytd) total will provide you details on how to do manual adjustments.

    Hope that helps. Thanks for posting a comment.

    jytte4/10/2013

    the quarterly SUI calculation used gross wages less "before tax" medical contribution for Jan & Feb. However it did not deduct the March contribution. Why the difference? and is the "before tax" contribution supposed to be deducted? this is in Washington state.

    Reply

    Jo Ann7/1/2013

    Your employees may have met the wage base for the tax that is no longer calculating.

    This article will provide you details about the limit:

    Taxes and rates: wage bases and limits

    Hope that helps. Thanks for posting a comment.

    Shannon4/13/2013

    I am trying to process our quarterly tax reports and payments and i'm encountering a problem with our TWC tax report. The report states we owe $281.11, but when I go to their website to make the payment, it reflects a zero balance. I have processed the payroll setup interview and it when i get to the section of state taxes, it states we have a discrepancy between what our reports say and what qbooks shows and the amount of the discrepancy is the $281.11. I have looked at all the areas I know to look, but have become frustrated. All the reports I run show the information is in qbooks?????? What do I need to do? Please help!!!!!!

    Reply

    mireille curro4/18/2013

    I have notice that the medicare employee additional tax is showing -0- and not deducting on the paychecks. What can I do to resolve that

    Reply

    Violet5/13/2013

    Hi Mireille,

    Additional Medicare starts calculating on paycheck, only after the employee has reached $200,000.00 in wages for the current year.

    If you have employees who have reached this limit yet Additional Medicare does not calculate on new paychecks, you should be able to use the troubleshooting steps outlined in this article to either determine why this is happening or to create manual adjustments.

    Thank you for posting your comment.

    Renee5/9/2013

    How will QuickBooks know when to start withholding medicare employee additional tax if there is no limit listed on the "payroll item listing".

    Reply

    Susan5/21/2013

    Hi Renee,

    The Medicare Employee Addl Tax payroll item in QuickBooks will start collecting when an employee is paid in excess of $200,000 in Medicare wages or compensation in 2013. Check out this article QuickBooks Payroll: Additional Medicare Tax for more information. The limit column in the Payroll Item Listing indicates when an item will stop collecting a tax. I hope this helps, thanks for your comment.

    Kendra7/7/2013

    I have only one employee where State and Federal witholdings are not being taken out. I checked her setup, and it reads "0 withold at the higher single rate". Which is what it should be, however, it is not deducting any amounts??? Help!

    Reply

    Jo Ann7/8/2013

    Hi Kendra,

    If you have followed the instructions in the second step of this article and have updated the payroll tax tables and the withholding taxes are still not calculating it may be because the employee doesn't make enough wages to calculate withholding. You can check her payroll tax setup to view that the number of allowances and the pay period are set up correctly. If they are, you can rest assured that QuickBooks is calculating her payroll taxes correctly.

    I hope this helps, thanks for commenting.

    Comments can not be added at this time.

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