Adjust Payroll Liabilities In QuickBooks

Adjust Payroll Liabilities In QuickBooks
  • December 12, 2023

The need for QuickBooks payroll liabilities adjustment usually arises when your payroll liability report gives an incorrect amount. To overcome such mistakes, you need to do the adjustment in your payroll liabilities and this guide shows you how it can be done at ease.

Payroll Liabilities Adjustment in QuickBooks

A payroll item can be adjusted if it is found out that a payroll liability balance is incorrect and needs to be adjusted. Liability balance adjustments change the amounts that QuickBooks shows in the payroll reports. It is recommended that for Payroll liability adjustments not identified below, consult with your QuickBooks Trainer or QuickBooks Administrator. Be cautious if you are operating the EnterpirseSuite edition.

How To Enter Payroll Liabilities Adjustment In QuickBooks

Liability Adjustments On some occasions, an employer payroll item expense can be changed under the Company Summary section of the Paycheck transaction even if the employee’s paycheck was printed and given to the employee. For example: overstated or understated payroll expense amount, unnecessary FUTA tax charged, etc. Determine if the payroll liability check needs to be voided.

  • Open the employee’s paycheck transaction.
  • Select the Paycheck Detail button.
  • Select unlock net pay.
  • Change the employer’s amount for a specific payroll item.
  • Save the transaction.

Scenario for Payroll Liability Adjustment

1. Scenario One: Adjust the Employer’s Payroll Expense

A small portion of employers’ Medicare share is exaggerated. The liability has not been paid. Open the appropriate employee’s paycheck transaction and follow the steps below:

  • Choose the Paycheck Detail button.
  • Go to Unlock Net Pay.
  • Under Company Summary, adjust the employer’s Medicare tax amount.
  • Select Ok.
  • Save & Close.

2. Scenario Two: Adjust Employee’s Deduction

The paycheck is already cashed. Suppose for instance medical insurance was carelessly withheld from the employee’s paycheck. The employee’s paycheck was distributed and cashed. $100.00 is owed to the employee. If the paycheck has been printed and distributed to the employee, do not clear the paycheck. Alternatively, create an appropriate liability adjustment and a refund check.

3. Scenario Three: Employer’s Payroll Liability Adjusted Carefully in the Liability Check Transaction

In this circumstance employer’s retirement liability originally was $50. Later on, it was discovered by the bookkeeper that the liability check amount was $110.00. Instead of changing the employer’s amount in the paycheck transaction, the amount was changed in the liability check. A liability Check was mailed.

4. Scenario Four: Employee’s Social Security Tax was underpaid.

If the employee’s social security tax needs to be increased in the next paycheck and if the paycheck occurs in the following payroll quarter then it will be adjusted in the next quarter. Once the paycheck is cashed, the employee’s social security tax cannot be adjusted.

To report both the unpaid employee’s and employer’s social security tax as the employer’s social security tax. The employee will reimburse the employer on the next paycheck.

Better payroll management will mean happy employees. And happy employees will mean improved productivity.

With QuickBooks, maintaining payroll records and making additions have become easier. All the products of the company offer adjusting payroll liabilities features to users to make sure you don’t miss out on anything while calculating the payable amount.

Gone are the days of manual calculations with which concentrating on minute details has become inevitable. You cannot afford to miss out on any deduction while deciding on payrolls.

Other Scenarios

You must be thinking about why the adjustment of payroll liabilities in QuickBooks is such an important feature. To make you understand the need for it in detail, it is important to list down the scenarios that may lead you to make an instant liability adjustment.

The list is as follows:

  • A wrong tax tracking type is included in a health insurance company contribution. This is a common scenario where organizational owners or HRs have to think of adjusting the payroll liabilities in QuickBooks 2015 or later versions
  • There are instances where a company has to stop future paychecks for some employees. In that case, the payroll liabilities need to be adjusted accordingly. You may need to adjust year-to-date (YTD) wages or addition or deductions to be made based on the situation.
  • Making adjustments is yet again an important step to be taken by employers when it comes to increasing or decreasing the payroll amount for company contribution items, including HSA and others.
  • In case of a quarterly change to be made in the payment of employees, you can consider making a quarter-to-date (QTD) adjustment instead of the year-to-date.

How to Enter Payroll Liabilities Adjustment in QuickBooks

Now that you know the scenarios that may make it mandatory for you to implement payroll liabilities adjustment in QuickBooks, the next thing to be understood is the steps to be followed to enter the same.

The steps are, therefore, listed below:

  1. Open  the employee’s paycheck transaction
  2. Click the Paycheck Detail button
  3. Choose to unlock Net pay
  4. Change the amount in the respective field
  5. Click Save

How to Adjust Payroll Liabilities in QuickBooks

Here are the two steps to be followed to adjust your payroll liabilities in QuickBooks:

1. Step One: Creating Payroll Summary Report

Before you adjust the payroll liabilities in QuickBooks, you need to have the summary report on the payroll item that needs to be adjusted.

The payroll summary report includes details on:

  • Employee wages, taxes, and adjustments
  • Net pay
  • Employee taxes and contributions
  • Employee sick and vacation time

To create the Payroll Summary Report, you need to:

  1. Select Reports
  2. Choose Employees & Payroll
  3. Go to Payroll Summary
  4. Select the date range
  5. Refresh it
  6. You may add pay periods under the Filters tab
  7. You can also remove the Hours and/or Rate columns if you want
  8. To print the report, select Print and then click Report

2. Step Two: Making Adjustments

  1. Select Payroll Taxes & Liabilities from the Employees option
  2. Choose Adjust Payroll Liabilities
  3. Choose the correct and Effective Date
    • Assisted Payroll - (If you select this option, use the last day of the affected quarter for a PREVIOUS QUARTER. Else, opt for the same date as the last paycheck if you wish to have the CURRENT QUARTER details.)
    • Basic, Standard, or Enhanced Payroll - The date should be the same as the last paycheck of the affected quarter or the present-day date (today) for the adjustment that affects the current quarter only.
  4. Go for either of two steps:
    • For adjustments affecting an employee’s YTD information, you can:
      • Choose Employees Adjustment
      • Select the employee in question
    • To delete the Payroll Liability Balances Report, choose Company Adjustment
  5. Go to the Taxes and Liabilities section
  6. There, click the Payroll Item column
  7. Select the correct payroll item
  8. Insert the adjustment amount in the fields needed
  9. Use the Memo column and note the adjustment details for future references
  10. Click on Accounts Affected
  11. There, you choose either Do not affect accounts (for keeping the liability and expense account balances unchanged) or Affect liability and expense accounts (to make changes to the respective balance amount)
  12. Choose Next Adjustment to repeat the same steps for other affected employees
  13. Click OK to save all adjustments made


Now when you have successfully adjusted the amount, it is very important to cross-check everything done from your side. To do this, the first step is to review the Payroll Summary Report and verify that the totals formed are now correct.

While the Basic, Standard, or Enhanced customers are allowed to check the report by running the Payroll Checkup, the Assisted Payroll customer has to get professional help to verify data.

Get Help to Adjust Payroll Liabilities In QuickBooks

QuickBooks ProAdvisor Support is a well-known QuickBooks Consulting Company that offers the best quality support for error rectification smoothly and swiftly. It houses highly experienced and knowledgeable QuickBooks professionals who with their combined skills help to resolve the issues. They assure complete error rectification in a minimum wait time. The resolution is complete and assured to be resolved in the minimum wait time.

Frequently Asked Questions

What are the reasons to adjust the liability of payroll?

  • In the case of company contribution items, the amount is changed. These items are 401K or HSA.
  • You fixed the wrong tracking type of tax for the Health Insurance company contribution setup.
  • If you have made the corrections in the additions, deductions, or YTD wages. This is for the employee who is not going to receive more paychecks.

If my payroll is not correct then can I use this adjusted payroll liability process?

Yes, you can go with the process and make the changes and then adjust the liability in your account and then proceed with the financial management.

What do you understand about payroll liabilities in QuickBooks Desktop?

Payroll Liabilities are nothing but the amount that you owe for payroll items that have not yet been paid. For different payroll processes, the liability list can include payroll taxes owed by you or your company such as Life insurance premiums, 401(k) plan contributions, union fees, and child support garnishments are the other sums that fall under payroll liabilities.

What are the apparent reasons behind the variance in the Balance report of Payroll Liability?

There are different situations where you need to make the change in QuickBooks to your payroll liabilities to rectify errors like:

  • Incorrect payments the date of payment of liabilities.
  • There might be damage issues to data in the company file.
  • You may not have downloaded the new edition of QuickBooks.
  • If you track another account, the other current liability account must be monitored.
  • You can see a liability in the payroll liability balance sheet when a paycheck is removed or annulled.
  • If it is used to use an inactive liability account.

What are various ways to do QuickBooks Payroll Liabilities Adjustment?

You can adjust as per the requirement or as per your error requirement:

  • Recreate a deleted or voided paycheck
  • Update QuickBooks to the latest released version
  • Rectify incorrect paid-through dates
  • Make sure QuickBooks verify and rebuild data utility.

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