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Adjust the payroll tax liability for the company vs. for an employee

Some adjustments require you to adjust for the company as a whole. Others require you to associate an employee with the adjustment.

Adjustments for the whole company

The most common reason to use a company adjustment is when there is a minor discrepancy (due to rounding) between liability calculations on a tax form and the sum of the liabilities for each employee.

If there is a significant discrepancy between what QuickBooks shows you owe and what you think you owe, you should determine what is causing the problem and use an appropriate solution.

Company adjustments may affect 940 and 941 forms. They do not affect W-2 or W-3 forms.

Important: The totals on your W-3 form should match the cumulative totals you reported to the IRS on your quarterly 941 forms for income tax withholding, social security wages, social security tips, Medicare wages and tips, and the Advance EIC. These 941 totals are matched against your W-3 data during W-2/W-3 processing. If the totals don't match, either the IRS or Social Security Administration will notify you of the out-of-balance situation. You'll have to research your payroll records and provide additional information.

Note: Effective January 1, 2011, the option for advance EIC payments has been eliminated. Individuals eligible for the EIC may still claim it on their personal income tax returns, but employers may no longer advance a portion of the credit with each paycheck.

Adjustments for an employee

Associate the adjustment with a specific employee when the employee's calendar-year totals for a deduction or company-paid tax or benefit are incorrect.

Employee adjustments may affect 940 and 941 forms. They may also affect W-2 and W-3 forms.

You don't need to make any adjustment if the total is too low and is for a flat-rate tax that is auto-correcting. (Unless the tax amount is for a prior quarter, QuickBooks increases the tax on the next paycheck to make up for the difference.)

Important: View the employee's totals on a payroll summary report that covers the entire calendar year, not on a paycheck voucher or paystub.

Examples of adjustments for an employee

  • You used the higher rate for federal unemployment (FUTA) and realize you should have used the lower rate. The employee's total for the year exceeds the maximum tax at the lower rate.

  • You have been using an Other tax payroll item for a local tax not supported by the payroll update, and realize that you set it up incorrectly.

See also

KB ID# H_PAY_ADJ_LIAB_EMP
12/4/2016 8:16:37 AM
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