Entering wage base and tax adjustment to correct employee's quarter (qtd) or year to date (ytd) total
This article explains how to use a wage base adjustment to correct an employee's year-to-date (ytd) information (wage base and tax amount) for flat rate taxes such as FUTA, Social Security, Medicare and SUI.
- Assisted Payroll: contact us at 888.712.9702 if you need wage base adjustment on taxes filed by Intuit.
- Basic, Standard, and Enhanced: running the Payroll Checkup will not automatically correct the wage base.
Common scenarios that can be corrected by doing a wage base adjustment in QuickBooks:
- You changed the tax item employee is subject to in the middle of the year, causing incorrect wage and tax amounts on tax forms.
- Employee's total wage base has exceeded the annual limit and you need to correct it.
- You changed the default tax settings in the payroll item set up causing error in tax calculation.
- You changed the rate for a tax item in the middle of a filing quarter or year and need to apply this change retroactively.
To make a wage base adjustment:
Create payroll detail report.
Customize your report to display only the affected date, employees and tax items.
- Click Customize or Modify Report tab.
- Click the Display tab and select the date range from drop down list or fill in the From and To dates. Example: if you are adjusting 1st quarter, your report should have a From Date of 01/01 through 03/31.
- Click the Filters tab and choose specific items from the Filter list that you want to display. Examples:
- if you want to display specific employees, choose name from the filter list and checkmark individual employee names from list.
- if you want to display specific list of payroll items/tax items, choose payroll item from filter list.
Verify that tax amounts are calculating correctly based on wage limit and tax rate.
- Verify if the employee had reached the wage base limit. QuickBooks stops calculating tax amounts once employee had reached the wage base limit.
- To verify whether taxes reported are correct based on wage base, multiply the wage base amount by the assigned rate.
Example: If employee has $10,000 in Medicare Employee wage base, the amount collected should be $145 based on 1.45% rate. ($10,000 x 1.45% = $145).
From the report, determine if you want to decrease or increase the wage base, tax amount and income subject to tax, and by what amount.
- Apply positive value to increase income subject to tax, wage base and tax amount.
- Apply negative value to decrease income subject to tax, wage base and tax amount.
Go to Adjust Payroll Liabilities.
- QuickBooks Pro and Premier: Choose Employees > Payroll Taxes and Liabilities > Adjust Payroll Liabilities.
Select the correct Effective Date. (It should be the last day of the affected quarter or today's date if doing an adjustment that affects current quarter only.)
Click Employee Adjustment.
Select the affected employee from the drop down list.
In the Taxes and Liabilities section, click Item Name column and select the payroll or tax item you want to adjust from the drop down list.
Enter the amount of the adjustment in the corresponding collumn (negative to decrease, positive to increase).
Use the Memo column to note the reason for the adjustment.
Click Accounts Affected.
Select Do not affect accounts or Affect liability and expense accounts.
If you have additional employees to enter adjustment for, click Next Adjustment button at the top. If you are finished, click OK to save your changes.
Refresh the Payroll Detail Review report to verify the accuracy of the adjustments you entered.
The data on your report should show the liability adjustments you entered and should have corrected the employee's quarter or year to data payroll data.