Sometimes, you might find QuickBooks Payroll not taking out taxes when creating paychecks. This might occur because your software or payroll is outdated, or the QB company data is damaged or corrupted. However, there could be more to the story.
Let us first understand why is QuickBooks Payroll not withholding taxes. This will allow us to find ways to address the problem so that we can resume sending paychecks.
Why is QuickBooks Payroll Not Taking Out Taxes?
Although there are multiple reasons why QuickBooks is not taking out taxes, let’s look into the root causes of this.
- The employee settings are wrong or misconfigured.
- Outdated version of QuickBooks Desktop.
- Corrupted or damaged company data.
- The employees don’t qualify for the taxable wage base, or the gross wage is lower.
- While the subscription status is inactive, this error occurs.
- Outdated payroll tax tables.
Lastly, knowing the causes of the error, let’s now look into possible hacks to fix it.
Also See: QuickBooks Payroll Won’t Update? Here’s the Fix That Actually Works!
QuickBooks Payroll Not Taking Out Federal Taxes? Things to Try
Moreover, after learning about the causes of QuickBooks Payroll not taking out taxes, one must know how to escape from this error and work smoothly.
1. Updating the QuickBooks Desktop
Furthermore, staying on the updated version can stop QuickBooks not taking out payroll taxes. Here are the steps to update the QB.
- Firstly, Launch the QB Desktop.
- Select Help.
- Head over to update QuickBooks.
- Tap on the reset updates option and click on get updates.
- Lastly, restart your system.
While updating your QB Desktop, if it doesn’t fix the error, let’s proceed with other troubleshooting methods.
2. Updating QuickBooks Payroll Tax Table
Although updating the QB Desktop can fix the issues, QuickBooks Payroll not taking out taxes. Suppose it doesn’t, move ahead and try to update your Payroll Tax Table. This can be one reason why QuickBooks is not taking out taxes. Here’s a guide to update the QB payroll tax:
- Start with opening QB Desktop > choose Get Payroll Updates under the Employee menu.
- Move forward with tapping on Download Entire Update.
- Now, update the QB Payroll Tax Table to the latest available version.
Updating the payroll tax table can help fix the issues that stop the process.
3. Verifying the Employee Payroll Data
Besides, QuickBooks Payroll not withholding taxes can be fixed by verifying the employee payroll data. While verifying the employee’s paycheck is necessary to calculate taxes and update the payroll. Follow the steps below to do it.
- Open QuickBooks Desktop > head to the Employees tab > then click Scheduled Payroll.
- After taking the steps, click Resume Scheduled Payroll.
- Choose Revert Paychecks for the employee names whose changes are reversed.
- However, to verify the employee’s paycheck, look for the yellow highlighted area and select Open Paycheck Detail.
- Complete the payroll information and save the data.
4. Checking for Employee’s Tax Setup
When the file status on the federal form W-4 is Exempt, the employee’s paycheck may not be held back for taxes. The file status should be updated; hence, here are the following steps.
- Head to the Employee Centre under the Employees tab > Double-click on every employee’s name.
- Verify the Pay Frequency is right by checking the Payroll Info on the left.
- Click on the Federal tab, review the Allowances and Filing Status columns, and then click the Taxes button.
- Next, adjust the necessary and select OK twice.
5. Verifying the Payroll Subscription Status
Indeed, the payroll subscription can stop deducting tax files whenever they are invalid or inactive. Here is the guide for verifying the status of your payroll.
- First, all the company files must be closed.
- Reboot your system.
- Open QuickBooks > move to Employees > select My Payroll Service, then tap Manage Service Key.
- The Service Name and Status should be correct and Active.
- Select Edit and confirm with the correct service key number.
- Click Next, uncheck the Open Payroll Setup box > and click Finish.
Sometimes, you might need to refresh the payroll service when you see Service Status as Suspended before you can update the tax table or send paychecks.
- Go to the Employees tab, scroll down, and choose My Payroll Service.
- Tap on the Account/Billing information option.
- Type in the Intuit user ID and password.
- Head to the Service Information section and tap on the Service Status.
- If you see it as Suspended, hover the cursor over the Annual Billing Details field and type in your credit card information.
- Choose Save.
The problem manifests itself when QuickBooks payroll taxes are not deducted because of subscription expiry. The steps mentioned above are to configure the issue.
6. Checking Employee’s Tax Calculation Limit
When creating a payroll, if the default limit has been reached, it won’t calculate the employee’s taxes further. The user needs to update the tax calculation limit to do so. Here’s how.
- Open QuickBooks, and head over to Lists.
- Click on Payroll Item List, then right-click on relevant payroll items.
- Click Edit Payroll Items, select Next, and wait for the Limit Type option.
- There will be three different options:
- Annual- Restart Every Year
- Monthly- Restart Every Month
- One-Time Limit.
- Now, the Limit Type can be changed for the employee.
- Click on Finish and reopen QB Desktop.
The employee’s paycheck should be created and checked to ensure the payroll properly deducts taxes.
You may also see: QuickBooks Payroll Not Calculating Taxes? Here’s the Fix You Need Now!
7. Verifying the Employee’s Payroll Tax Configuration
According to the QB payroll data, taxes are being calculated. Certain factors affect the calculation of payroll taxes, salary and wages, allowances, pay frequency, and filing status.
The following is a guide to ensure the factors are correctly mentioned in QB payroll.
- Open QB Desktop and open the Employees menu > head to Employee Center.
- Double-click on the name of the employee and click on Payroll Info.
- Verify the Pay Frequency and head over to the Taxes table.
- Choose Federal option > review the Filing Status and Allowances.
- Tap OK to save all the changes made.
Even if all the steps trigger the error, remove the duplicate payroll tax items. To delete the duplicate payroll tax items, proceed to the next step.
8. Deleting the Duplicate Payroll Tax Item
Duplicate payroll tax items can cause incorrect tax deductions. So, delete all the duplicate tax items; you can ensure the seamless calculation of payroll taxes. Here’s how to do so.
- Open QuickBooks and head over to the Employees tab.
- Select Employee Center > double-click on the employee’s name.
- Click on Payroll Info > then select the Taxes option.
- Choose Other and find the duplicate payroll tax item.
- Click on delete to erase the duplicate payroll tax item, and then hit OK.
Conclusion
In conclusion, we discussed why is QuickBooks Payroll not taking out taxes and how an outdated tax table affects that. Moreover, we walked through multiple troubleshooting methods to resolve this error. If you are still struggling with the same problem after performing the steps above, feel free to contact a QB Expert. Dial +1(855)-738-0359 24*7!
Frequently Asked Questions
When QuickBooks Payroll does not deduct taxes, the issue can be caused by a wrong payroll item setup, corrupted files, or duplicate payroll tax items. Moreover, this happens when the QB version and the tax table are not properly updated, or the installation is not done correctly.
If you find QuickBooks payroll not taking out taxes, update the QB Desktop application and the payroll tax tables. Here are some things you can do if the problem persists:
1. Verifying the Employee Payroll Data: Check that the Employee payroll data is correctly entered.
2. Checking for Employee’s Tax Setup: Verifying the tax setup is appropriate for the payroll creation.
3. Check the Payroll Subscription Status: Ensure that the Payroll Subscription is active to make the changes.
4. Check Employee’s Tax Calculation Limit: Extend the calculation limit for the employee tax files.
5. Verify the Employee’s Payroll Tax Configuration: Check for the employee’s tax files and the information.
6. Delete the Duplicate Payroll Tax Item: If there is any duplicate for any employee files, it should be removed to undergo tax file creation.
The IRS Form W-4 might have declared the employee exempt from federal income tax withholding. An employee might qualify for a withholding exemption to claim this exemption and have no federal income tax withheld from their wages.
Kate is a certified public accountant (CPA) with expertise in various accounting software. She is technically inclined and finds passion in helping businesses and self-employed people carry out bookkeeping, payroll, and taxation without worrying about errors. Every once in a while, Kate loves to travel to far-off places and relax in the lap of nature.