How To Adjust Payroll Liabilities in QuickBooks? Track, Record, and Pay

How to Adjust Payroll Liabilities

A little over half of the small business owners overpay their taxes to the state and federal government each year, either as a consequence of incorrect tax payment estimates or out of worry about IRS sanctions. You may choose to credit the overpaid amount as your payroll tax duties and get this overpayment corrected in your QuickBooks Company file if you are an employer who overpaid payroll tax obligations using QuickBooks. Although, businesses or employers might occasionally try to change an employee’s year-to-date (YTD) or quarter-to-date (QTD) data. Included in this are employee contributions, deductions, and employer contributions. You should address any incorrect payroll liabilities right away. However, in order to pay payroll liabilities in QuickBooks, one must maintain the correct information.

So, here is the proper explanation of the procedures for adjusting payroll liabilities in QuickBooks Desktop and QuickBooks Online in this article.

What are Payroll Liabilities?

WHAT ARE PAYROLL LIABILITIES

Just like other types of liabilities, payroll liabilities are sums of money that you owe to your employees but fail to pay. It includes the amount of payroll tax withheld from the workers.

Few examples of payroll liabilities-

  • Union Dues.
  • Health Insurance.
  • 401(k) contributions.
  • Deductions for child support.

Main Reasons for Issues in Payroll Liabilities in QuickBooks

The QuickBooks liability adjustment has several applications. It’s critical to comprehend why you need to change payroll liabilities in QuickBooks Online and on your Desktop before doing so. The list of causes for problems with QuickBooks payroll liabilities is as follows:

  • Corrupt data in the company file.
  • The report on the payroll liabilities balance has problems.
  • The date of liability payment is incorrect.
  • While logging into an inactive account.
  • Older version of QuickBooks.
  • The account number used to track present liability is incorrect.
  • The check is annulled or void.

  • Liability Adjustment should be made when there is a need for Additions, deductions, and YTD wages for those employees who are not getting additional paychecks.
  • If you have accidentally set up an incorrect tax tracking type for Health Insurance. 
  • To correct or make changes to 401(K) company match or health savings Account (HSA).

Steps to Adjust Payroll Liabilities in QuickBooks Desktop

1. Find Payroll Inconsistencies

The initial step is to locate the payroll inconsistencies. Use the Payroll Checkup tool for this. You can zero out payroll liability after you get the necessary information. Additionally, this program will offer recommendations for solving the issue.

To learn how this tool works, read the steps below:

  • The program will scan the payroll data to verify the present setup to help you spot discrepancies and missing data.
  • It will assess the tax sums, payroll item setup, wage, and employee data.
  • The Payroll Checkup tool also shows any anomalies in the flat-rate tax amount.

Following the completion of your payroll inconsistency checkup, you must run a payroll summary report for the quarter that requires adjustment. Also, note down the amount of the Payroll Item(s) that you want to change.

2. Payroll Liabilities Adjustment

  • Select the Adjust Payroll Liabilities option under Employees → Payroll Taxes and Liabilities.
  • Secondly, fill out the fields using the advice provided below-
  • You must enter the same date that appears in the last paycheck of the impacted quarter in the Date column. Use today’s date, though, if you are working in the current quarter.

  • The 940 & 941 forms and your Payroll Liabilities Balance Sheet compute amounts based on the Effective Date.

It should be recognized that alterations may affect both your employee and the business. Here is the information on both categories:

  • Select “Employee Adjustment” if the adjustment is for an employee and the things you are adjusting are paid for by the company. Additionally, it updates the W-2 form’s YTD information for the employee.

  • Opt for “Company Adjustment” to get rid of the balance from your “Payroll Liability Balances Report.”

Start choosing the employee from the list after that

  • After that, fill out the “Taxes and Liabilities” section.

  • Item Name: Here, pick the thing you want to change.
  • Amount: Enter a positive number to increase the amount and a negative number to decrease the amount.
  • Wage Base: This area is not very useful. You must utilize this if you want to override a paycheck’s tax payment amount.
  • Income Tax Subject: You only need to use this function when you are making a wage basic payment.
  • Memo: You can enter the adjustment note in this field.

  • At this point, select “Accounts Affected” and press “OK.”  Likewise, be certain about the following:

  • Select “Do not affect accounts” from the menu. It won’t affect the balance of the liability and expense accounts. Only the payroll reports’ YTD totals will change as a result of the adjustment.
  • Select “Affect liability & expenditure accounts” to add the transaction altering the liability and expense accounts.

If necessary, you can use the same procedures for additional staff. When finished, press the “OK” button.

3. Verify that the Liabilities are Updated

After completing the steps to alter payroll liabilities in QuickBooks Desktop, you should confirm that the liabilities are correctly adjusted. Run the payroll summary report to accomplish this. It will then enable you to ascertain whether everything is alright. To run the payroll summary report in QuickBooks Desktop, follow these steps:

  • Select “Reports” from the menu.
  • Choose “Employees and Payroll” after that.
  • Select “Payroll Summary.” Adjust the date range after that.
  • You may now select “Run Report.”

4. Make Payroll Liability Check corrections (Optional)

The liability check in QuickBooks Desktop might need to be modified if the issue has been fixed. The steps for fixing the payroll liability check are as follows:

  • Select the Banking option from the top menu bar, then click on the Use Register link.
  • Click OK after selecting the register you use for payroll in this section.
  • Right-click the Liability Check and choose the Edit Liability Check option.
  • Then, after modifying it, go to payroll obligations and match the modifications.
  • At last. Click the Save & Close option and then choose “Yes.”

Steps to Adjust Payroll Liabilities in QuickBooks Online

1. Run the Payroll Summary Report

In order to determine what has been paid out, you must first construct the Payroll Summary Report. The amount and date can then be adjusted to make the necessary liability modifications. To run the Payroll Summary report in QuickBooks Online, follow these steps:

  • Choose “Reports” from the menu.
  • Next, look for the “Payroll” category.
  • Select “Payroll Summary” from the menu now.
  • Using the drop-down option, you may now also modify the date range.
  • Following that, you can select the employee.
  • Press the “Run Report” button.

2. Edit Payroll Liabilities

  • Select “Employees” from the menu.
  • Choose “Adjust Payroll Liabilities” from the menu.
  • Enter the date for which you are making the modification in the “Date” field.
  • Add the required date by clicking on the “Effective Date” box.
  • In the “Adjustment is for” field, pick “Employee.”
  • You can also choose the employee name by clicking on the drop-down menu.
  • Next, for the “Item Name” category, select “Taxes and Liabilities” from the list of sections. This area contains the “Item Name” column.
  • You can choose the pertinent payroll items from this list.
  • Enter the amount that needs to be adjusted now.
  • At this point, select “Accounts Affected” and press “OK.” Likewise, be certain about the following:

  • Select “Do not affect accounts” from the menu. It won’t affect the balance of the liability and expense accounts. Only the payroll reports’ YTD totals will change as a result of the adjustment.

  • Choose “Affect liability & expenditure accounts” to add the transaction altering the liability and expense accounts.

  • If necessary, you can use the same procedures for additional staff.
  • When finished, press the “OK” button.

Here’s How to Delete or Remove a Scheduled Payroll Liability From QuickBooks

  • On QuickBooks, click on Payroll center under the Employees tab. 
  • Here you will see a pay liability section click on it and navigate to the other activities drop-down. 
  • Further click on the change payment method, then from the payroll setup screen, choose Benefits and other payments. 
  • Then click on schedule payments and choose the payroll item that needs to be edited. 
  • Then check “I don’t need a regular payment option for this section,” which you see in the payment frequency section. 
  • Finally, click on finish two times to save the changes.

Reconcile Payroll Liabilities QuickBooks

Reconciliation of Quickbooks payroll liabilities is essential for business owners.

Follow the steps to achieve that:

  • Printout specific payroll register
  • Match particular employee time cards to pay the register
  • Verify wages, deductions, and pay rates on paychecks.
  • Post your final entries in the general ledger, which should correspond to your specific record.

So, now you have all the information necessary to adjust QuickBooks payroll liabilities. We have outlined the whole process for adjusting the payroll liabilities online and on the desktop. If you lack enough accounting understanding, we advise you to take professional payroll services before making changes to payroll liabilities. We, TheBookify, can solve all your financial hustles. Call us at our toll-free line at +1-844-405-0904. We connect you with our Certified QuickBooks expert if you are not sure about payroll liabilities in QuickBooks. Book a free consultation

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FAQs

What three categories of payroll liabilities exist?

Payroll liabilities are basically any expenses that an employer has when they engage people to do work. Taxes, perks, and salaries are three common types of payroll liabilities.

In QuickBooks, how can I zero out payroll liabilities?

Follow these easy steps to zero out your payroll liabilities
●    Select the transactions payment history page in your QuickBooks software’s pay liabilities tab.
●    After that,  Choose “Delete” from the top of the screen.
●    At last, click “OK” to delete the specific payment.

Why do my Quickbooks payroll liabilities show as negative?

So, the reason for having negative payroll liabilities in QuickBooks could be the voiding of the paycheck. When you have already marked the payment as paid, then the negative balance will appear on your QuickBooks account.

How can I modify the due date of QuickBooks payroll liability?

You can easily modify the due date with these steps
 
●     Firstly, Click on Employees.
●     Then, Select Payroll Center.
●     Choose the Pay Liabilities tab.
●     Select the “Schedule payments” from the Payroll Setup menu in QuickBooks.
●     In the next step, choose the tax obligation for which you wish to create a schedule.
●     Click on the “Edit” option.
● Pick your schedule from the Payment frequency dropdown.

Author Details
Financial Advisor , The Bookify
Hi! I am Madeline Ortega, a financial advisor. I offer free financial tips. Since 2016, I have written more than 1,000 articles on managing your small business finances.

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