Adjust payroll liabilities
This article explains how to use a liability adjustment to correct an employee's year to date (ytd) information contained in payroll items such as company contributions, employee addition and deduction payroll items. Below is a list of common scenarios that can be corrected by doing a liability adjustment.
- You set up Health Insurance Company Contribution with the wrong tax tracking type and need to move year to date (ytd) amount from the wrong payroll item to the correct one.
- You need to adjust year to date (ytd) wages, deduction or addition payroll items for an employee who will not be receiving any more future paychecks (i.e.: terminated employee)
- You need to increase or decrease amount for company contribution items such as Health Savings Account (HSA), Simple IRA company match or 401(k) company match.
- If you are a Basic, Standard, or Enhanced customer, run the Payroll Checkup.
- If you are an Assisted Payroll customer, please contact us to complete these corrections or if you need to do an adjustment for payroll liabilities that affects payroll taxes.
- Assisted Payroll customers cannot adjust payroll liabilities paid by their payroll service. Liability adjustments for company contributions, per employee, can cause errors to employee records if the adjustments are performed outside the quarter in which they occurred. (For example, for a March 15 paycheck with an effective date of June 15, you must change the effective date to March 31 of that year.)
Create a Payroll Summary Report to get the amount on the payroll item that needs adjustment.
Choose Employees > Payroll Taxes and Liabilities > Adjust Payroll Liabilities.
Select the correct Effective Date.
- Assisted Payroll: It should be the last day of the affected quarter or today's date if doing an adjustment that affects current quarter only.
- Basic, Standard or Enhanced Payroll: It should be the same date as the last paycheck of the affected quarter or today's date if doing an adjustment that affects current quarter only.
Do one of the following:
- If this adjustment will affect an employee's year-to-date (YTD) information, choose Employee Adjustment and then select the employee in question.
Note: Do this even if the item being adjusted is a company-paid item. It updates the YTD information reported on the employee W-2 form.
- If the balance simply needs to be removed from the Payroll Liability Balances Report or removed because it causes a balance to appear in the Chart of Accounts, choose Company Adjustment.
In the Taxes and Liabilities section, click the Payroll Item column and select the correct payroll item.
Insert the amount of the adjustment in the corresponding field (negative to decrease the amount of the liability and positive to increase the amount of the liability).
Use the Memo column to note what the adjustment is for, for future reference.
Click Accounts Affected, choose Do not affect accounts or Affect liability and expense accounts.
- To leave the balances unchanged for the liability and expense accounts that track the payroll items you are adjusting, select Do not affect accounts. The adjustment will still change the year-to-date amounts on your payroll reports.
- To enter an adjusting transaction in the liability and expense accounts that track the payroll items you are adjusting, select Affect liability and expense accounts.
If you have additional employees, click Next Adjustment and repeat the steps for each affected employee. (Be sure to change the Date and Effective Date and Employee Name fields.)
If there are no additional employees, click OK to save your entries.
Review the Payroll Summary Report to verify that the totals are now correct.
If you have Assisted Payroll, send a zero payroll to transmit your changes to the payroll service.
Correcting the Payroll Liability Balance Report and Liability Check that had already been entered or sent for payment.
To fix the Payroll Liability Balance Report and the Liability Check:
- Go to your payroll Bank Register and locate the liability check you created for the old payroll item
- Right click on it and select Edit Liability Check.
- Under the Payroll Liabilities tab, replace the old payroll item with the new one.
- Click Save & Close and click Yes to the message to record changes.
Adjust Multiple Liabilities at the Same Time
You can adjust more than one liability at a time during one liability adjustment transaction by selecting the payroll items in the payroll item column provided. You can use only one effective date for a liability adjustment. If you need to make adjustments for more than one period, then you must use a separate adjustment transaction for each period. Also make sure that the adjustments are correct by selecting the appropriate reports when finished.