What If: QuickBooks Payroll Taxes Are Not Computing?

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A QuickBooks user asked us: "I have been using QuickBooks Enhanced Payroll for QuickBooks Desktop, and my payroll has been working just find.  Today, when I started to do my bi-weekly payroll, I noticed that Federal Withholding and some other taxes were not computing for everyone. What do I do?"

If you are certain that your 'payroll subscription' is active, which you can check that from the Account/Billing Information sub-menu within the My Payroll Service menu item under the Employees Menu (as seen below), then the problem is with what I term a 'clogged payroll update'. Of course if your subscription has gone inactive, then it's time for a renewal.

You will also want to make sure that something 'odd' hasn't happened in the employee's payroll record, because sometimes little 'gremlins' get in there and play around with things. Like when the boss started looking around and unchecked the taxes box, or made a payroll item inactive, or set the employee to 'no withholding' status. 

But I am betting 'big bucks' that you are really having a problem with the last payroll update.

Really, this is a problem that most QuickBooks users can self-resolve, but it certainly is something that every QuickBooks ProAdvisor should just be ready to resolve at a moment's notice, because QuickBooks Payroll updates are notorious for causing problems of this nature.

How this happens:

Sometimes when QuickBooks downloads an update of the payroll tax tables, a payroll process can get stuck when the payroll update doesn't fully install.  This is especially so when you may have already started a payroll, then left the payroll center, and then returned. If a payroll update has downloaded and started to install, it get's 'clogged up' because part of the payroll cycle is done, but the rest hasn't finished.

Here is an example of two different employees, the first one everything worked just fine, but for the 2nd one, the taxes didn't compute.

Billy Bob's Payroll is 'just right'...

But Lizzy Bell's Payroll is 'all wrong', no taxes were withheld by QuickBooks...

Resolving this 'mess':

So you really have two options in this case, and a lot will depend upon how many employees have improper computation in the paycheck window, and how good you are at manually computing payroll taxes.

I'm really doubting that you want to do any manual payroll computations, after all that's why you purchased a payroll subscription in the first place. So rather than compute and manually enter both the withholding and employer matches, (note that the employer share didn't compute properly for Lizzy's paycheck either), I suggest you do the following.

Go ahead and Save Billy Bob's Check just the way it is. Now change Lizzy Bell's check and reduce the number of work hours to 1 (a single hour), then Save that check just they way QuickBooks computes it.

If these were your only two employees then you would finish payroll normally, with the exception of NOT printing the actual paychecks.

Open the check register and then 'Void" (that's what I said, 'Void", don't delete) Lizzy's paycheck that is in error.

Now close QuickBooks, and then Re-open it.  Many times a Payroll update will not fully install until QuickBooks is closed and reopened.

Now go back to the Payroll Center, and process a new paycheck for Lizzy, making certain to set the starting, ending, and check payment dates for the appropriate time frames. QuickBooks should now properly compute Lizzy's entire paycheck including all the appropriate tax withholding and employer matching amounts.

As you can see in the above example, Lizzy's replacement check is 'just right' with all the taxes computed properly. 

Of course, if you had more than 1 paycheck that didn't compute, you have to go through this process for each paycheck, changing them all to just one hour, then voiding them all, then going back in and issuing new paychecks.  Still the same that is better than breaking out the abacus and computing withholding the old fashioned way.

Just make certain you don't process an additional paycheck for Billy Bob (or anybody else who had their check computed properly); heck they hardly earn the first check you give them, you certainly don't need to give them an extra.