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Fix overwithheld payroll taxes in previous quarters

Note for QuickBooks Payroll customers

Note for Assisted Payroll customers

If you have overwithheld employee-paid taxes in any previous quarter of this year, create an employee liability adjustment that adjusts each tax by the amount of the discrepancy.

  1. Go to the Employees menu, choose Payroll Taxes and Liabilities, and then Adjust Payroll Liabilities. Shortcut

  2. In the Effective Date field, enter the last day of the quarter in which the discrepancy occurred.

  3. Under Adjustment is for, select Employee.

  4. Click the Employee drop-down list and choose the employee whose tax liabilities you want to adjust.

  5. In the Item Name field, enter the payroll item for the employee-paid tax you overwithheld.

  6. Calculate the adjustment amount by subtracting the actual amount withheld from the correct amount. Enter the difference as a negative amount in the Amount field. (A negative amount decreases the employee's total for this tax.)

  7. For a tax such as social security or Medicare that has a company-paid component as well as an employee-paid component, you can enter the adjustment for the company payroll item on a separate line in the same window.

  8. Click the Accounts Affected button. The Affect Accounts window appears.

  9. In the Affect Accounts window, make sure Affect liability and expense accounts is selected. Click OK.

  10. In the Liability Adjustment window, click OK. The Account for payroll liabilities window appears.

  11. Choose an other current liability account (such as Owed to Employees) so that you can reimburse the employee. Click OK.

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