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Everything To Know About Adjust Payroll Liabilities in QuickBooks

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Quickbooks helps businesses manage payments, pay taxes, run payroll, and settle any liability for the businesses. The application works on the data entered by users, making mistakes on their part is very natural. That is one big reason why intuit developers added an option to adjust payroll liabilities in QuickBooks. The users can use the payroll adjustment liability feature to correct employees’ year-to-date (YTD) or Quarter-to-date (QTD) payroll information. Users can also make changes in company contributions, employee additions, and deductions. So, we have enclosed this blog with what payroll liabilities are in QuickBooks and how to adjust it.

Are you trying to adjust payroll liabilities in QuickBooks and have had no real success till now? Well, reach out to our experts at Asquare Cloud Hosting Helpline Number at +1(855)-738-0359 and they will provide you with step-by-step solutions on how to adjust payroll liabilities in QuickBooks. 

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Reasons To Use Payroll Liability Adjustment

There are numerous reasons to use payroll liability adjustment, such as correcting the wrong tax tracking type, making changes for employees who would not get further payroll, and changing the amount of company contribution. Here is the complete list of reasons for this error:- 

  1. To correct a Health Insurance Company Contribution that had the wrong tax tracking type set up.
  2. Correcting YTD wages, deductions, or additions for an employee who is not supposed to receive any more paycheck.
  3. Making changes to the amount for company contribution items such as Health Savings Account or 401(k) Company match.
    • To cancel the overdue liability or correct the amount of liability entered in your application. 
    • To correct the error of posting payroll items in the wrong Chart of Account
    • To make corrections if payroll liability is out of balance. 

Things To Do Before You Adjust Payroll Liabilities in QuickBooks

Certain things need to be done before you adjust payroll liabilities in QuickBooks as it brings in a permanent change in your company file and also to ensure what are the things that require changes. Here are the things you need to do:-

1. Create a Backup Of Your Company File

Payroll liabilities adjustment will bring in a permanent change in your company file, and thus it becomes important to create a backup as you should have a copy of your current file if you need it in the future. 

2. Run a Payroll Checkup

Payroll Checkup is a tool that helps you figure out issues that can affect your liabilities. This tool will:

  1. Scan your payroll data for missing information and discrepancies to confirm your existing setup.
  2. Check your employee’s records, payroll item setup, wages, and tax amounts.
  3. Determine whether there are any tax amount discrepancies on a flat-rate tax. The tool will also recommend methods to resolve the issue.

3. Run Payroll Summary Report

You need to run a payroll summary report for the quarter or year that requires adjustment and note down all the items that require changes. 

Additional Article: Download the Latest QuickBooks Payroll Tax Table Update.

> For Assisted Payroll or QuickBooks Online Payroll  

It is impossible to adjust overpaid payroll liabilities in these versions by users themselves and thus requires an expert to fix it. Call our experts at Asquare Cloud Hosting Helpline Number, and they will help you fix the issue.  

> For Basic, Standard, or Enhanced Payroll 

You will have to fill up certain payrolls liability adjustment fields, such as the effective date, item name and many others. The step-by-step guide to using Payroll liability adjustment is as follow:-

a. Adjust Payroll Liabilities

  • Tap on the Employees tab and select Payroll Taxes and Liabilities. Choose Adjust Payroll Liabilities.
  • Follow these tips to fill in the field-
    1. Use the same date as the last paycheck of the affected Quarter. Use the current date if the problem is with the current Quarter. 
    2. The Effective Date column will be used to calculate amounts on your 940 and 941 forms along with Payroll Liability balances Report. 

If you want to learn about filing Forms, keep reading this article on how to Print W2 Forms with QuickBooks online payroll.

b. Select the option based on the party that requires adjustment    

  1. Choose Employee Adjustment if the item you’re adjusting is a company-paid item. It updates the YTD information reported on the employee W-2 form.
  2. Choose Company Adjustment if you wish to remove the balance from the Payroll Liability Balance Report.
  • Choose the Employee.
  • Fill in the Taxes and Liabilities fields.
    • Choose the Item Name you want to make changes to.
    • Enter the Amount that is required to be adjusted. Use a positive number to increase and a negative to decrease.
    • A wage Base is hardly ever needed even when you have to override a tax amount on a paycheck.
    • Income Subject to Tax is only used when making a wage base adjustment.  
    • Use the Memo field to enter a note about the adjustment for future reference. 
  • Choose Accounts Affected and then tap on Ok.
    • Choose Do not affect accounts in order to leave balances unchanged for the liability and expense accounts. The adjustment will only change the year-to-date amounts on your payroll reports. 
    • Choose Affect Liability and expense accounts to fill in adjusting transactions in the liability and expense accounts. 
  • Repeat these steps for another employee if required. 
  • Now run the Payroll Summary report again to ensure that everything is right. 

Note:- The steps mentioned below are to correct a payroll liability check and are optional in nature.

  • Go to the Banking tab and then choose Use Register.
  • Choose the register you use for payroll and then tap on OK. 
  • Right-click on Liability Check and choose Edit Liability Check.
  • Go on Payroll and Liabilities and update them so that they match your changes. 
  • Tap on Save and Close and finally click on Yes.

Additional Article: Fix QuickBooks Multi-Currency Problem.

How to Delete a Liability Adjustment in QuickBooks?

A wrong payroll adjustment can sometimes cause disparities in your books of accounts and thus you need to delete a liability adjustment in QuickBooks. The steps you need to follow are:-

  • Go to the Payroll Center.
  • Click on the link Adjust Payroll Liabilities under the Pay Liabilities tab.
  • Tap on the Previous button and keep on pressing it until the adjustment you wish to delete is actually deleted.
  • Then tap on the Edit button in the menu bar.
  • Click on Delete Payroll Liability option.   

Ensure that you use the Previous button in order to view your liability adjustments and then remove it from your account.  

Additional Article: How To Fix QuickBooks Payroll Center Error 40001.

Let Experts Help You Adjust Payroll Liabilities in QuickBooks

Now we hope you know how Payroll Liabilities Adjustment works in Quickbooks. If you still have any doubts left or could not complete the given steps due to any reason, we will advise you to reach out to our contact Asquare Cloud Hosting’s expert team at +1.855.738.0359 so that they can guide you and you don’t lose any data. 

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