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Correcting underwithheld payroll taxes

Note for QuickBooks Payroll customers

Note for Assisted Payroll customers

If you have underwithheld employee-paid taxes, create an employee liability adjustment that adjusts each employee-paid tax by the amount of the discrepancy.

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

  2. In the Effective Date field, enter the last day of the quarter in which the tax 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, choose the payroll item you want to adjust.

  6. Calculate the adjustment amount by subtracting the actual amount withheld from the amount you should have withheld. Enter the difference in the Amount field. (The amount should be positive, because you want to increase the employee's liability for the tax.)

  7. Click OK to close the warning message about creating a paycheck.

  8. Click the Accounts Affected button.

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

  10. In the Liability Adjustments window, click OK. The Account for employee liabilities window appears.

  11. Choose an asset account (such as Employee Loans) so that you can be reimbursed by the employee. Click OK.

Alternatively, you can enter a "gross-up," although this method is more costly to your business because you are not reimbursed by the employee.

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PPRDQSSWS904 9142 Pro 2018 32631a