How to Fix QuickBooks Not Calculating Payroll Taxes Error

Taxes are the most important part that you need to take care of when you are trying to run a business. Oftentimes, when you are not able to calculate payroll taxes, it halts your business activities altogether. You will need to resolve this issue to proceed with any other important activity.

So when your QuickBooks is Not Calculating Taxes because of some issue, it’s time you look for help. The SMBAccountants help team is here to resolve this issue for you instantly. Follow the procedure carefully. If you encounter a problem, you can always contact our QuickBooks Desktop Support Team by calling our toll-free help line.

What is Payroll Tax Error?

Sometimes, when QuickBooks updates a payroll tax table, a payroll process could get stuck when the payroll update is not completely installed. It happens when you start a payroll process, leave the payroll centre, and then return after a while.

Main Reasons Why QuickBooks Not Calculating Payroll Taxes Issues Occur

You may find yourself in this situation for a number of reasons. These include the following:

• A primary reason could be too low gross wages belonging to the employee on the last payroll.
• Outdated payroll tax tables can also cause this problem.
• It is also possible to run into this problem if the employee’s total salary exceeds the salary limit.
• A payroll tax table that is outdated can also contribute to this problem.

Symptoms of QuickBooks Unable to Calculate Payroll Taxes Problem

The QuickBooks payroll error gives distinct indications that it is approaching. These are listed as follows:

• Calculated sum being incorrect.
• Tax-related components are invisible on the paycheck.
• Total sum appearing zero.

Quick Steps to Resolve QuickBooks Payroll Tax Calculation Error

How to Fix QuickBooks Not Calculating Payroll Taxes Issues?

The answers vary according to the kind of mistake you are experiencing. We are going to discuss three typical scenarios and their fixes.

Case 1: Incorrect tax amount on paychecks

This is a common one in which a particular tax, such as federal income tax (FIT), FICA, or Medicare, is computed at an incorrect amount, yet that amount is not zero. This is an indication of an issue with the particular rate or structure of the tax item.

Solution 1 – Check the Payroll Item Setup

The easiest way is to check the configuration of the tax item in question.

• Open the Payroll Item List

You can open the Payroll Item List by clicking on the menus, under the Lists menu.

• Edit the Tax Item

Locate the erroneous tax entry (e.g. Federal Withholding) and by clicking on it, it will open up the setup window.

• Review the Settings

Take a close look at all payroll item setups. Make sure that the “Tax Tracking Type” is proper (e.g. “Federal Withholding” in the case of FIT). The section concerning Taxes must properly show what taxes the item is influencing. E.g. a gross wages item needs to be verified in all the applicable taxes (FIT, FICA, Medicare, etc.).

• Check Limits and Rates

Check that there are no limits that should be set annually and that the tax rates are correct. As an example, FICA has a yearly wage base limit, so that in case it is miscalculated, taxes will cease to be withheld too soon.

If there be a setting that is not right, change it, and then return to the paycheck and press the recalculate button to see whether the tax amount is now correct.

Solution 2 – Run a Payroll Summary Report

A payroll summary report may assist in comparing the total amount of taxable wages to the total taxes withheld from an employee.

• Generate the Report

In the section of reports, go to Employees and Payroll and navigate to Payroll Approach Report.

• Set the Date Range

Ensure that the date range includes the pay period being considered.

• Analyze the Data

See the column of Taxable Wages that has the wrong tax. Compare this with the withheld amount in the form of Total Taxes. When the taxable wages are much less than the gross wages, then it implies that some items of payroll are not being taxed in the right manner.

• Cross-Reference

Then you can cross-reference the taxable wages with the specific items of payroll to the employee to determine which one is the problem.

Solution 3 – Verify the SUI Rates

In case the issue is that of the State Unemployment Insurance (SUI), then you must verify the SUI rate charged to your business.

• Company Preferences

Under edit, go to preferences and then Select Payroll and Employees.

• Company Information

Enter the Company Information tab.

• Check SUI Rate

Make sure that the rate you have entered here is the one given by your unemployment agency. The wrong calculations will be made because of a typo or an outdated rate.

Solution 4 – Setting up a New Tax Tracking Type

There are certain exceptional occasions where the already existing types of tax tracking can be corrupted or not function as expected. You may attempt to make a new one as a workaround.

• Create a New Payroll Item

Go to Payroll List Items and an item is created.

• Select the Correct Type

Select the payroll item type which is in error (e.g., “Company Contribution”).

• Assign the New Tax Tracking

You can give a new Tax Tracking Type during the setup. Give it the right type (e.g., SUI Employer) and finish the configuration.

• Use the New Item

Return to the payroll of this employee and make the new item in lieu of the old, erroneous one.

You may like this: Set up Payroll Taxes in QuickBooks Desktop

Case 2: If you are getting an amount of $0.00 on paychecks

This is a deeper issue that is not computing payroll taxes at all in QuickBooks. This usually indicates a configuration or data integrity problem that causes the software to be unable to identify the need to withhold.

Solution: Revert, Recreate, or Void the Paycheck

One of the most frequent causes of a zero-point tax amount is a glitch with the data or an imperfect manual entry on the paycheck. The easiest and best answer is to begin anew with the problematic paycheck.

• Revert the Paycheck

When the paycheck is open and not saved, you can clear all changes by clicking on Revert so that you will be at the original state.

• Recreate the Paycheck

In case the paycheck is saved, and not yet processed or sent, you can delete the paycheck and create a new one. Go to the check, select the check by clicking on the Edit button, and you will see Delete Paycheck. Next, return to the payroll center and make another one of the same employee and pay period.

• Void the Paycheck

In case the check has already been printed, deposited, or sent to the employee, you should void it.

• Go to the “Employee Center.”
• Locate the worker and click on the tab of transactions.
• Find the paycheck, right-click and choose Void.
• Once the check is voided, make another to replace it. This ensures the balance of all financial records is taken care of.

Case 3: The annual or quarterly wage tax info is inaccurate

This problem occurs when the amounts in the reports of an individual period (quarterly 941, annual W-2s) are not correct, while the amounts in the individual paychecks themselves seem to be computing correctly. This implies that there is some issue in the manner in which QuickBooks is consolidating the data.

Solution 1: Run the customized report to check that employees are correctly set

You must ensure that all employee and related payroll items have been properly set up throughout the period.

• Generate a Customized Report

Click on Reports, Employees and Payroll, Payroll Summary by Employee.

• Customize the Report:
  
  • Click “Customize Report.”
  • Select the date-range to the quarter or year you are analyzing.
  • Go to the Filters tab and select Payroll Item and there select All Payroll Items.
  • On the Display tab, choose the columns of the Gross Pay and all the other applicable tax items (e.g., Federal Withholding, FICA, Medicare and the rest).

• Analyze for Discrepancies

This is the report that will provide you with a breakdown of each employee’s wages and taxes for the period. See where the numbers do not add up with any employees. Indicatively, when an employee has gross pay with a figure of 0.00 corresponding to a specific tax, then it is an indication that he/she has set up his/her personal details incorrectly or a data problem.

Solution 2: Verify the tax tracking

Tax tracking type is an important element that instructs QuickBooks on how to classify a payroll item so that it can be reported.

• View the Payroll Item List
  
  • Click on “Lists” and then Payroll Item List.

• Check Each Item

Click twice on each payroll item that you use (e.g., Salary, Bonus, 401k) and check the “Tax Tracking Type” column. Make sure you place the proper type on each item. As an example, a Bonus item is expected to be of the tax tracking type of Wages. When set to none or any other value, the bonus wages will not be subject to inclusion in the taxable wage base to report, resulting in false quarterly and annual amounts.

• Correct and Recalculate

In case you encounter a wrong setting, correct it. To determine whether the totals are correct now, you may be required to run a Verify Data utility and then make a new blank paycheck.

Solution 3: Verify the item rates

A miscalculation on reports can be present even when the tracking of the tax is correct but with the wrong rate.

• Review Tax Items

In your Payroll item List, edit each tax item (e.g., “FICA-Employer”).

• Check the Rate

Make sure that the Company rate and the Employee rate are accurate. E.g., the employer rate and the FICA employee rate should be 6.2% each. The Medicare rates are both 1.45%.

• Check for Annual Limits

Ensure that any wage base limits are in place. FICA wage base varies every year, and unless your QuickBooks is updated with the updated base, it will keep calculating FICA tax beyond the limit, resulting in an erroneous quarterly report.

Conclusion

So when your QuickBooks is Not Calculating Taxes because of some issue, it’s time you look for help. The SMBAccountants help team is here to resolve this issue for you instantly. Follow the procedure carefully. And if you faced a problem, you can always contact our QuickBooks Desktop Support Team by calling our toll-free help line.

Frequently Asked Questions