How to Adjust Payroll Liabilities in QuickBooks

A liability adjustment may be used to correct payroll liabilities that are inaccurate.

Payroll liabilities can be difficult to modify. Use them only if you understand accounting or if your accountant advises you to. If you need an accountant, you can locate one. Contact us at QuickBooks Desktop Error Support to make the changes if you use Assisted Payroll. You won’t be able to make improvements to your liabilities by yourself. You can use these steps whether you have Basic, Standard, or Enhanced Payroll version of the QuickBooks Desktop software: 

Perform a Payroll Audit. This method assists in the identification of issues that concern your liabilities. 

• Verify your current setup by checking your payroll data for missing information and inconsistencies.
• Examine the payroll item setup, as well as the salary and tax amounts for each employee.
• Determine if there are any tax sum anomalies on a flat-rate tax. The tool will make recommendations on how to address the problem.

Run a Payroll Summary report for the quarter in which you need to make changes. Make a note of the number on the Payroll Item or any other things that need to be changed.

Select Adjust Payroll Liabilities from the Employees menu, then Payroll Taxes and Liabilities.

Use these hints to assist you in filling out the fields: 

• Use the same date as the affected quarter’s last paycheck. If you’re focused on the current quarter, use today’s date.
• The Effective Date is used to measure amounts on your 940, 941, and Payroll Liability Balances Report.
• If the thing you’re modifying is a company-paid item, choose Employee Adjustment. It corrects the YTD data on the employee’s W-2 form.
• If you want the balance to be deducted from the Payroll Liability Balances Report, choose Company Adjustment.

Choose an employee.

Fill in the Taxes and Liabilities parts.

• Choose the Item Name you’d like to change.
• Enter the adjustment’s dollar number. To increase or decrease the volume, use a positive or negative number.
• And when you override a tax sum on a paycheck, a Wage Base is seldom needed.
• When adjusting your pay base, you only use Income Subject to Tax.
• You should make a note about the change in the Memo area for future reference.

Select Affected Accounts and then OK.

• Choose to Keep the liability and cost accounts’ balances unchanged by not affecting them. Only the year-to-date amounts on the payroll records will be affected by the modification.
• To enter an adjusting transaction in the liability and expense accounts, select Affect liability and expense accounts.

If required, repeat for additional workers, then pick OK.

Rerun the Payroll Overview report to ensure that all is in order.

Make a payroll liability check a correction.

Have you already paid the liability? In QuickBooks, you’ll need to correct the liability search.

• Select Use Register from the Banking section.
• Select the payroll register, then click OK.
• Pick Edit Liability Check from the context menu when you right-click the Liability Check.
• Adjust your Payroll Liabilities to reflect your changes.
• Choose Yes, then Save & Close.