This article will help you in learning QuickBooks calculates to know the reported tax amounts on your employee’s paycheck or the year-to-date (YTD) payroll report.

Remember!

  • Payroll wage and tax calculations in QuickBooks Desktop are tracked depending upon the data and transactions entered by you in QuickBooks Payroll. Your employees and payroll items need to be set up appropriately to make QuickBooks to calculate correct wages and tax amounts.
  • Intuit suggests you running payroll reports on regularly to check your employees’ payroll data so that the mistakes can be tracked before tax filing season comes.
  • Run the Payroll Detail Review Report (go to the Reports menu, then select Employees & Payroll > Payroll Detail Review) to validate the wage and tax calculations of your employees.

 

QuickBooks Calculation Method What you may see
QuickBooks requires an accurate percentage of annualized method and tax tables (and not the weekly, biweekly, or monthly method).

QuickBooks calculates the payroll taxes as per the year-to-date amount and not as per transaction.

If your employee was under or over collected on flat-rate taxes, QuickBooks will enter modifying adjustment amounts on upcoming paycheck.

There can be some differences between calculations done by QuickBooks and the wage bracket taxes printed by agency publications. Both methods are appropriate and accepted by the agency.

The tax table:

  • Adjusts many flat-rate taxes automatically. Such as:
    • Social Security
    • Medicare (for Additional Medicare tax, check the User Guide for QuickBooks)
    • Federal Unemployment (FUTA)
    • State Unemployment (SUI – wage base limit only, SUI rate is unique to your business)
    • State Disability (except for HI and NY)
    • Predefined local taxes
  • Manages rounding discrepancies and retroactive tax rate changes for flat-rate taxes such as FICA, FUTA, SUI, and SDI taxes (some SDI taxes are flat-rate).

Non-retroactive tax rate changes can’t be adjusted or corrected.

It also reviews the rates and wage limits for federal, state, and rate-defined local taxes.

QuickBooks restricts you to collect tax amounts if employee reaches the wage base limit for the tax time.

When the employee reaches $200,000 in wages for ongoing year, only then the Additional Medicare starts to calculate on paycheck.

The amount of $0.00 will be shown on the paycheck when an employee has reached its wage base limit.

Federal and State Income Tax (FIT and SIT) calculations

The following points determined Federal and State Income Tax amount calculations:

  • agency’s wage and tax calculation table
  • Filing status of employees, number of allowances, or additional withholding amount in the employee paycheck.
  • The paycheck will include pre-tax deduction.
  • Modifications in pay frequency (creating additional paychecks other than the normal pay schedule).
  • Creating a paycheck having wages with less or more amount as compare to the employee receives in a pay period.

Additional Medicare

Additional Medicare comes under paycheck calculation if the employee reaches $200,000.00 in the current year’s wages. You have to make sure that all your employees are setup for Additional Medicare under their employee profile to be eligible for Medicare Employee Addl Tax to make sure that the taxes are calculated when the Medicare limit of an employee is reached.

Special Calculation situations

If one of your employees has a 0 amount or any other amount which is not an usual one, it will always show erroneous calculation. This happens only because QuickBooks is designed in such a way. In the following points, we have provided some special calculation situations that can occur while creating a paycheck.

  • Annualized salary exceeds the salary limit – The FIT and SIT can’t be calculated automatically when the gross wage of employee is too much, and it reaches the limit in QuickBooks Desktop. When this happens:
    • Validate whether the wage in employee’s paycheck is right by putting a checkmark on Earnings section of the paycheck information.
    • When the wage is right, you have to manually calculate FIT and SIT and then enter the amount in paycheck information.
    • If the wage is wrong, you need to manage your employees’ salary or hourly rate from employee information section.
      • From the Employees menu, select Employee Center.
      • Locate and double-click on employee’s name and then navigate to the Payroll Info
      • From the Earnings section, provide appropriate Hourly/Annual employee rate.
    • The gross wage of the employee is too low – If wage of one of your employee’s wage is too low, most probably the FIT and SIT calculation will be zero.

Reach Us For QuickBooks Assistance

Hopefully, this article was helpful for you in understanding how QuickBooks Desktop calculates payroll taxes. However, there can be situations when QuickBooks can calculate incorrect payroll taxes because of incorrect entered data. In such situations, you need to get connected with QuickBooks ProAdvisors by dialing our toll-free QuickBooks Support Phone Number +1800-567-0425 for instant solutions for your issues.

How QuickBooks Calculates Payroll Taxes

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