Adjusting the liability balance for payroll items

If you are using Assisted Payroll, you cannot adjust the liability balance for liabilities paid by the payroll service (federal and state tax liabilities). However, you can adjust the liability balance for local or other taxes not supported by the payroll service.

If you're not using Assisted Payroll (or are in the process of signing up for it), you can enter an adjustment for any payroll item. For example, after you prepare a payroll tax form, you may discover that your balance for a liability payroll item needs to be adjusted. Or, while going through the wage and tax verification process during Assisted Payroll signup, you may need to enter adjustments.

Liability balance adjustments change the amounts that QuickBooks shows in your payroll reports.

To adjust the liability balance

1. From the Employees menu, choose Process Payroll Liabilities, and then Adjust Payroll Liabilities.

2. In the Date field, enter the date for which you are making the adjustment.

   QuickBooks prefills today's date, but you should enter the date that you want the adjustment to be effective. Otherwise, this item will not show up in the appropriate Payroll Summary Report.

3. In the Effective Date field, enter the date that you want this adjustment to affect your liability balance.

   QuickBooks uses this date to calculate amounts on your Forms 940 and 941 and on the payroll liability balances report.

4. Choose whether to associate this liability adjustment with the company or a specific employee.

   For example, if you overaccrued federal unemployment tax (FUTA) for an employee, you would click the Employee option and choose that employee's name from the drop-down list.

5. In the Item Name field, choose the payroll item.

6. In the Amount field, enter the amount of the adjustment.

   • To increase the amount owed, enter a positive number in the Amount field. If you chose to associate this adjustment with an employee, QuickBooks displays a message that you should create a paycheck instead.

   • To decrease the amount owed, enter a negative number in the Amount field.

7. (Optional) In the Memo field, enter a note to yourself about the adjustment.

   The note will appear on any detail payroll reports that include this transaction.

8. Click Accounts Affected to check or modify the setting, and click OK.

Should you affect your accounts?

9. If you need to adjust an employee's wage base, click the Show Wage Bases button.

   QuickBooks adds a Wage Base column to the window. You rarely need to change an employee's wage base. Even if you overrode a tax amount on a paycheck, the employee's wage base is probably correct.

10. When you've finished adjusting the liability, click OK.

Related topics

• Verifying payroll liabilities