How Do I Resolve a Paycheck That Incorrectly Calculates Payroll Taxes?

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  • you’re using an out-of-date tax table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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  1. My payroll taxes continue to be off even after udates and rebuild. How can I fix this issue? If my QB data is corrupted how can I fix it? The last updates on my taxes caused it to double the amount of Social Security taken out of each person’s check. It was fin until I did the update but if I use the previous backup that worked then I will have to re-enter everything I did between that back up and current won’t I?

    • Chief Mechanic says

      If your data file is corrupted, you can try contacting Intuit, which does offer data recovery services.

      For your deductions, you should review each payroll item and make sure the values are correct. Then you should review an employee and see if his or her payroll items are correct. Finally, you should prepare a sample payroll for the employee you just verified and see if QB calculates that employee’s paycheck properly. Getting a better handle on exactly what is wrong will make it faster to find a solution.

  2. took paycheck to bank already. it printed corectly $37.74 (very few hours)(4hours at $10.00 an hour) but in quickbooks it shows that check # to be for $59.44. Trying to do W2’s and mine is off. I know how to change it or edit it but i will also have to change SS tax it would be a penney less to balance. Is it wise to do this? This is for my church so I do not want to do something I will regret but I need the computer info to match the check info as I have already cashed the check from 12/26/2012

    • Chief Mechanic says

      Can you explain why that check printed for 1 amount but was recorded in QB for a different amount?

      You could: 1) on the original check date, generate a new check that matches the $37.74 you actually cashed; if your original check was numbered 1234, you can number the replacement 1234-1; 2) verify the payroll taxes match at least approximately to the original check; your W2 will be based on the new check; 3) void the check for $59.44 and change its number to something other than the check # of one you originally cashed (say 1234-2); 4) edit the check 1234-1 to change the check # to 1234, the check # of the one you actually cashed. At that point, your W2 should match what you earned. However, the YTD totals on the paystub won’t match because you voided the check after generating a new one. You can change the order of those steps to make the voiding step occur before you generate a new check so that the paystub will match the W2 if that’s important to you.

  3. HELP! I calculated 3 things incorrectly regarding my payroll taxes! UGH. It’s been done all year up to May 27th.
    1.) The federal payroll taxes are wrong (had old tax tables)
    2.) I also calculated employees part of SS wrong (did give them that new reduction).
    3.) SUTA (got new rates that are retro active to 1st Qtr)
    SO…what I have done is do all the payroll again long hand on ledger. Therefore I have the correct figures, however all my payroll information in Quickbooks is wrong and since the paychecks were cashes and reconciled I don’t know how to get the correct figures on my computer! PLEASE PLEASE PLEASE HELP!

    • You’re almost there, since you’ve already done the hard part: recalculating everything. The next step depends on how you use QB Payroll. If you do NOT use QB Payroll to prepare and file your tax payroll forms, you can simply use general journal entries to record the difference between what you manually calculated and what QB calculated using old tax tables. For the employer side taxes, your entries would be debits to the expense account and credits to the payroll tax liability account. If your manual calculations show that you should have made different deductions for employee side payroll taxes, you’ll have to work out with your employees how to do that, since if they owe more money, they may not like a large one-time deduction on their next paycheck.

      If you DO USE QB Payroll to prepare and file your payroll tax forms, you should click on the Payroll tab of Employee Center. You can also get to the same place by visiting the Employees->Payroll Taxes and Liabilities->Adjust Payroll Liabilities menu choice. Before doing anything in this window, you’ll need to create Payroll Items that point to your expense and liability accounts for each payroll tax affected. Then, you’ll use these Payroll Items, which you can manage on the Employees->Manage Payroll Items menu selection, to record the required adjustments, and you’ll pay these adjustments like any other liability.

      Hope that helps.