How to Post a Payroll Tax Liability Adjustment in QuickBooks Desktop

This article addresses how to post a payroll tax liability adjustment in QuickBooks Desktop.

 

Here is the scenario:

You received your annual Texas state unemployment tax rate notice that informs you of what your effective tax rate will be for the upcoming calendar year. Unfortunately, this notice did not arrive until well after the new year had begun and thus after you had processed a few payrolls already in the new year. So, in other words, you have already processed payrolls within the new year, but under the old state unemployment tax rate (of the previous year).

Now, you need to correct your current payroll tax liability within the QuickBooks Desktop Payroll software to reflect the new year’s tax rate.

Please note: Once you update the payroll software with the new rate:

  • The quarterly payroll tax form (C-3) should calculate correctly anyways (to reflect the new tax rate x the taxable wages).
  • The software will attempt to “catch up” to the new liability in future payrolls.
  • If the software cannot catch up to the new liability amount due before the first quarter ends, then you will need to post a payroll tax adjustment effective on the last day of the first quarter.

 

So, within QuickBooks Desktop, you will need to adjust this payroll tax liability due for each affected employee. Let’s get started:

 

  1. Go to the Employees top drop-down menu and then> Payroll Taxes and Liabilities>Adjust Payroll Liabilities.
  2. Set the date and the effective date to 03/31/current year.
  3. Adjustment is for> Choose Employee
  4. New choose the employee’s name from the drop-down menu.
  5. Under taxes and liabilities (below), choose the Texas Unemployment payroll tax item; usually it is named TX – Unemployment Company.
  6. Enter the amount of adjustment. If you tax rate went down, then your adjustment amount (expressed in dollars) will also go down. So, in this scenario, the adjustment will be a negative dollar amount.
  7. Leave the wage base and income subject to tax fields at zero.
  8. Click on “Accounts Affected” on the right side and be sure the selection “Affect liability and expense accounts” is chosen. Click Ok.
  9. Click Ok again.
  10. New go to your Payroll center, and within the Pay Liabilities tab, your TX-Unemployment Insurance amount due should now be corrected; it should match whatever you had previously calculated as the actual Q1 amount that should be due based on the new tax rate for the new year.

 

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.

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