If this is the first time you’ve run payroll or issued a paycheck to this employee, it’s likely that incorrect payroll tax calculations are due to an incorrect setup. This article addresses the situation where previously issued paychecks to a given employee contained correct tax calculations, but a new attempt to produce a paycheck shows incorrect payroll taxes, even though no changes were made to payroll configuration.
In this situation, incorrect calculations of payroll taxes are usually caused by one of several factors:
- you’re using an out-of-date tax table
- data corruption in your QuickBooks company file (.qbw)
There’s also the possibility that the calculation only appears incorrect if federal or state withholding amounts on a paycheck are 0.00. QuickBooks annualizes the wages on a paycheck, and if the annualized wages are small, federal or state withholdings can be correctly calculated as 0.00, even when prior paychecks for the same employee included these withholding taxes. Intuit describes this as a Special Calculation Situation in the window below:
However, even in these situations, other taxes may be due, such as employer FICA taxes. If all taxes are calculated at 0.00, that may indicate an incorrect calculation.
The first step to resolve an incorrect payroll tax calculation is to make sure you have the latest payroll update. See our article on how to update your QuickBooks payroll software.
Once you’ve installed the latest update, attempt to create a new paycheck for the same employee whose paycheck previously showed incorrectly calculated payroll taxes. Even if the payroll tax calculations are incorrect, complete the steps to save the paycheck. If the payroll tax calculations are correct, the payroll update solved the calculation problem.
If the payroll tax calculations remain incorrect, your QuickBooks company file likely has data corruption. Before addressing the data corruption, open the Employee Center, locate the employee with the incorrectly calculated paycheck that you just created, and delete the paycheck with the incorrect payroll tax calculation. That will prevent an incorrect check from being issued.
Many, but not all, data corruption problems can be solved with QuickBook’s Rebuild utility. See our article on how to use the Rebuild utility to fix a damaged company file.
Once you’ve successfully run the Rebuild utility, attempt to issue a paycheck to the same employee whose paycheck previously contained an incorrect tax calculation. If the payroll tax calculation continues to be incorrect, it’s possible that your company file has data damage that the Rebuild utility couldn’t fix or there are other issues involved. An undamaged QuickBooks company file running with the latest payroll updates and correct payroll configuration will produce correct payroll tax calculations.
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