How to Adjust Payroll Liabilities in QuickBooks Online?

Just like any other liabilities, payroll liabilities are certain amounts that are not being paid by you but you owe […]

Just like any other liabilities, payroll liabilities are certain amounts that are not being paid by you but you owe it to your particular employees. This also comprises the amount of payroll tax that is kept from the employees.

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Let’s learn more about the importance of adjusting payroll in QuickBooks Online.

Why it is Important to Adjust Payroll Liabilities in QuickBooks Online?

Liability adjustments for payroll in QuickBooks Online are required for multiple reasons. Prior to going for payroll liability adjustment in QuickBooks Online, one must know why you need to adjust the liabilities.

Here are the primary reasons to adjust the payroll liabilities in QuickBooks Online:

  • Liability adjustment can be utilized for additions, deductions, and YTD wages for those employees who will not get additional paychecks.
  • To solve the Health Insurance Company setup with the right tax tracking type.
  • To rectify the company contributions items amount, for instance, 401k company match or Health Savings Account.

How to Adjust Payroll Liabilities in QuickBooks Online?

Businesses may require to edit the payroll liabilities for several reasons. If you are utilizing QuickBooks Online and need to adjust the payroll liabilities, the steps given below can be used. In simple words, you need to run the Payroll Summary and edit the date or amount in the payroll liabilities.

1. Run the Payroll Summary Report

First, you need to make the Payroll Summary Report so that you can locate the items that have been paid out. Then, you can make edits to the amount along with the date and correct the liability amount. Following are the steps to run the Payroll Summary Report in the accounting software QuickBooks Online:

Step 1: Choose the Report menu.

Step 2: Now look for the Payroll section.

Step 3: Now press on the Payroll Summary.

Step 4: Now, after this, you can edit the date range. You can do it with the help of the drop-down menu.

Step 5: Now, you can select the employee.

Step 6: Press on Run Report.

2. Edit the Payroll Liabilities

Step 1: Press on the option that says, Employee.

Step 2: Now, choose the Payroll Liabilities menu.

Step 3: Press on the option Adjust Payroll Liabilities.

Step 4: Navigate to the Date field and add the date for whom you are doing the adjustment.

Step 5: Now, press on the section of Effective Date. After that add the date you want.

Step 6: Select Employee for the field that says Adjustment is for.

Step 7: Now pressing on the drop-down, you can choose the employee name.

Step 8: Now, navigate to the Item name area.

Step 9: Choose the related payroll item for the option Taxes and Liabilities.

Step 10: Now press on the section Taxes and Liabilities. Here, you will see the Item Name column.

Step 11: Here, you can choose the related Payroll items.

Step 12: Now, enter the amount for the adjustment.

Step 13: Now you can select the Accounts Affected and press the button for OK.

Step 14: You need to make sure of certain things like:

  • Select the option Do not Affect Accounts. This will not alter the liability and expense accounts balance. The adjustment, however, will edit the YTD amounts that are on the payroll reports.
  • Also, press on the Affect Liability and Expense accounts. This will help to include the adjusting the transaction in the liability and expense accounts.

Step 15: For other employees, if needed, you can perform the same steps.

Step 16: When completed, press the button that says OK.

How to Manually Edit QuickBooks Online (QBO) Payroll Liabilities

You should manually amend Payroll Liabilities in QuickBooks Online for various reasons, such as Payroll Credits, Penalty & Interest, Late Filings, and many more. Other times, processing Payroll Liabilities manually is simply required. An encounter I just had with one of my clients first made me think of this topic and essay.

Case-N-Point: Liability Credit

One of the clients was issued a credit for State withholding. Below are the steps that are used to enter the credit in QuickBooks Online Payroll Essentials.

  • First, you have to go to the Navigation Bar, then you have to go to Taxes, then go to Payroll Taxes, then you have to Enter Prior Tax History.
Enter Prior Tax History
  • Then you have to select the Current Year and then select Liability Period.
  • Now you have to add payment.
Add Payment
  • Now you have to select the Tax Type and then you have to enter Liability Period.
  • Then you have to enter the payment date and then you have to enter the Check number and Notes.
  • You have to create a Credit by entering a Negative Amount.
Create a Credit by Entering
  • After that, when you have entered all necessary information you have to click the green OK button.

You have to verify the next liability amount by confirming your adjustment was added to the payroll.

Other Reasons for Adjustment: Late Payment or Penalty/Interest

You can use this process also:

  • Start by following steps 1 through 7 above
  • You have to enter a positive amount which creates an additional payment that is made outside of QuickBooks Online payroll, instead of creating a credit by posting a negative amount (as in Step 8 above).
Posting a Negative Amount
  • You have to click the green OK button when you have entered all the necessary information.

When all the steps given above are completed, you can make the liability adjustment in QuickBooks Online without any trouble.

Steps to Adjust Overpaid Payroll Liabilities in the Company File

Only Enhanced, Basic, and Standard payroll service users can complete the following tasks. You need to get help from support if you are using QuickBooks Online Payroll or Assisted Payroll because you can’t adjust payroll responsibilities on your own.

Adjustment for the Company

  • Payroll Taxes and Liabilities can be found under the Employees tab on the QuickBooks Desktop application’s dashboard.
QuickBooks Desktop Application's Dashboard
  • Choose Adjust Payroll Liabilities, then choose the date you wish the adjustment to take effect.
  • Select the adjustment’s Effective Date at this point.
  • Then you have to select Company that is under the Adjustment for segment.
  • Now you have to select the adjustment item from the Item Name drop-down menu at this point.
  • Now you have to enter the amount that you paid less than to make the adjustment.
  • In the Memo section, you have to type your explanation for the transaction.
  • Then you have to click the Accounts Affected button.
  • If you want your accounts to be affected, click Affect Liability and Expense Accounts; otherwise, click Do Not Affect Accounts.
  • On the Affect Accounts screen, you have to click OK.
  • To save the adjustment you have to click OK again.

Adjustment for the Employee

  • From the Adjust your Company method as given above, you have to follow steps first to third.
  • Under the Adjustment is for segment, you have to choose Employee.
  • Select the employee whose information you wish to change from the drop-down list by clicking their name.
  • Select the payroll item to be adjusted from the Taxes and Liabilities column, then enter the negative amount.
  • To save the changes, you have to follow steps 7 through 11 as mentioned in the Adjustment for the Company procedure.

Steps to Get Overpaid Liability as a Payroll Tax Liability Credit

  • You have to generate a liability check by following the steps mentioned in the art
  • In QuickBooks, choose the account you want to be credited under the Expenses tab.
  • Enter the negative amount that has to be credited in the Amount area.
  • In the Memo section, you have to type the explanation for the adjustment.
  • To reconcile the check and credit amounts, click Recalculate.
  • If there is still a credit balance, proceed in the same manner.

Following the steps given above will help you fix your problem for good. Just make sure you follow them in the given sequence.

Adjusting payroll liabilities is important for business. When companies wish to make changes in year-to-date or quarter-to-date of the employee, then the right payroll adjustment is important.

Still, if you are confused about payroll adjustment and how to edit them in QuickBooks Online, then you can connect with industry experts like us.

Accounting Professionals, CPA, Enterprises, Owners
Accounting Professionals

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Frequently Asked Questions

How can You Delete the Payroll Liabilities Adjustments in QuickBooks?

In a Payroll centre, you can find the tab that says Pay Liabilities from the given drop-down menu. There will be a connection that says Adjust Payroll Liabilities, if you have clicked on that particular connection, then add your click on the button that says Previous till you get the liability to edit.

How to Reduce the Payroll Liabilities?

To minimize the burden of the payroll tax rate of an organization you can follow the options like: you can provide tax-exception advantages instead of additional cash. Even if you require to compensate employees with bonuses, rewards or any kind of raises, consider tax-exemption.

Can Payroll Liabilities be Zeroed Out?

All the liability accounts records must be zeroed out for long, because they must be paid. If the employees are paid net compensation, they coordinate with the particular net compensation that has been calculated in the payroll and after that, the wags payable record will eventually zero out.

What are the main Reasons for issues in Payroll Liabilities in QuickBooks?

Here is the list of the reasons for issues in Payroll Liabilities in QuickBooks:

checked Incorrect liability payment date
checked Wrong account number for tracking present liability
checked Issues in Payroll liability balance report
checked Corrupted data in the company file
checked The version is not updated
checked The paycheck is deleted or voided. This leads to a liability
checked While accessing an account that is inactive

How to Add Tax Liabilities in QuickBooks?

Here are the steps to add Tax Liabilities in QuickBooks:

Step 1: Select the Payroll Center from the given Employees menu.

Step 2: Now, navigate to the Pay Liabilities section.

Step 3: To edit your payment technique, choose Change Payment Method which is in Other Activities.

Step 4: The foremost thing to do is to choose the tax liability that you are trying to schedule or edit.

Step 5: You will require to add the information after choosing Edit.

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