PAYROLL REPORTING ERROR: Federal FUTA 940 Form

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Payroll Reporting Error:

When running payroll forms 940 and Schedule A, the wages are not flowing to Schedule A to calculate the correct Credit Reduction.

It's that time of the year again, year-end, and people are already experiencing issues with improper reporting of payroll data on their 'preliminary' (test) reports from which they verify and/or troubleshoot their filings prior to the deadlines.  This is one such example.

Federal Unemployment Tax (FUTA) is routinely subject to a credit when employers also pay State Unemployment Taxes.  Due to federal mandate, employers in 8 states (who also pay state unemployment taxes) are subject to the FUTA Credit Reduction. The percentage of the reduction varies by state and QuickBooks is designed to identify, compute and report that credit reduction.  The states subject to the Credit Reduction are CA, CT, IN, KY, NC, NY, OH, and the Virgin islands.

Payroll issues of this nature may result from programmatic improper computations, out-of-compliance tax tables, incomplete or improper set-up of the related payroll item(s), or data damage. Solutions aimed at resolution are focused upon these possible causes.

Possible Solutions:

There are different solutions based upon your own circumstance, follow the solutions in order, unless one solution advises you to specifically 'skip' to an alternative solution.

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Solution 1 - Update QuickBooks to the latest release and then update your payroll subscription to the latest payroll release.

(Illustration:    Left: Update QuickBooks release - Right: Update QuickBooks Payroll Subscription)

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Solution 2 - Confirm that your State Unemployment (SUI) is configured properly:

   A. Go to Reports > Employees and Payroll > Payroll Summary

   B. Click on Customize Report and edit date range to Customize Report

   C. Look under Employer Taxes and Contributions

   D. Confirm that State Unemployment (SUI) is recorded

  • If State Unemployment IS NOT showing on Payroll Summary, proceed to Solution 3
  • If State Unemployment IS showing on Payroll Summary, proceed to Solution 4

(Illustration:   State Taxes Tab of Employee Payroll Information window)

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Solution 3 - Confirm State Unemployment selection and create liability adjustment

   A. Conform State Unemployment (SUI) selection:

  • Go to Employee Center and double click on first employee's name
  • Click on Payroll Taxes tab, then Taxes
  • Click on State tab
  • If SUI (Company Paid) is not checked, it needs to be selected and an adjustment entered.  Note:  if there is no State SUI selected, nothing will populate on Schedule A
  • Click on box to select it
  • Using drop down, select State Worked
  • Verify that there is a state selected for State Subject to Withholding
  • Repeat for all employees having worked during the year

   B. Create Liability Adjustment:

  • Go to Employees > Payroll Taxes and Liabilities > Adjust Payroll Liabilities
  • Set date to year end (i.e. 12/31/15) (effective date will automatically adjust)
  • Select Adjustment is for: Employee
  • Select employee (and class if appropriate)
  • Under Item Name, select State Unemployment
  • Enter Amount as total SUI due/paid for that employee
  • Enter Wage Base
  • Click Accounts Affected

         (a) If amounts HAVE been paid, select Do not affect accounts

         (b) If amounts HAVE NOT been paid, select Affect liability and expense accounts

  • Click Next Adjustment
  • Repeat for all other employees having worked during the year

   C. Rerun Payroll Summary from Solution 2 and confirm State Unemployment (SUI) totals

   D. Run Form 940, Credit Reduciton should now be showing on Schedule A

   E. Enter a FUTA adjustment for Credit Reduction

  • Go to Employees>Payroll Taxes and Liabilities>Adjust Payroll Liabilities
  • Set date to year end (i.e. 12/31/15) (effective date will automatically adjust)
  • Select Adjustment is for: Company
  • Under Item Name, select Federal Unemployment
  • Under Amount, enter amount from Schedule A
  • Click Accounts Affected>Affect liability and expense account.

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Solution 4 - Perform Steps to Resolve Payroll-item related Data Damage

   A. Resort All QuickBooks lists

   B. Run the Verify Utility

   C. Review the QBWin.log file

   D. Identify data damage related to Payroll issues (or other)

   E. If the QBWin.log shows data-damage for Federal Unemployment or State  Unemployment items (as in YTD amouns out-of-balance as shown in this example:

   F. Repair the damage manually:

  • Run a detail report for this payroll item (Federal Unemployment, in our example) and for the affected employee (Andria J Cavaner, in our example);
  • Re-open each paycheck beginning with the oldest in the period, and then working your way toward the most recent, be sure to ‘unlock’ net pay as you review each one, this will force re-computation as each are saved.  [Note: For some payroll-items you could see a change in the amount that may impact ‘net pay’ in your register; however, in the case of Federal Unemployment which is an Employer (Only) liability, the NET pay should not be affected on any paycheck.]
  • After you go through each check, run Rebuild, be certain to perform the Back-up of your data prior to Rebuilding.
  • Then run Verify to make certain the error has cleared, if the error still has not cleared, contact ‘Intuit Payroll Services Support.’