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Similar to other liabilities, payroll liabilities are something or the amounts that are not being paid but you owe it to the particular employee. It further includes the amount of payroll tax. The reason why you need to adjust payroll liabilities can be in case there is any addition or deduction and also the YTD wages for the employees who won’t get additional paychecks. It can also be required for the health insurance company set up the right tax tracking type. The user might also need to adjust liabilities to fix the company contribution items amount. The process to adjust payroll liabilities in QuickBooks involves a couple of steps, which we will be explaining in detail later in this article. Thus, make sure to read the article carefully. Before you start with the implementation of the steps further, note that you should only opt for this process, if you have a basic knowledge of QuickBooks and accounting, else try seeking for assistance from an accountant or professional. 

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Steps to adjust the payroll liabilities in QuickBooks desktop

In case the user is having basic, standard, or enhanced payroll, he/she can perform the below steps:

Before you follow the steps, the user should have a look at the following reasons to use a liability adjustment:

  • The user is required to fix a health insurance company contribution set up with the wrong tax tracking type
  • Another reason can be to change the amount for company contribution items like Health savings account or company match
  • Or in order to correct YTD wages, deductions, or additions for an employee who will not be getting further paychecks

Step 1: Finding payroll discrepancies

  • The user needs to first run a payroll checkup. This will help in looking for the problems that affect the liabilities. The tool will perform the following steps:
    • The tool will verify the current setup by scanning the payroll data for missing info and discrepancies
    • And then review employee records, payroll item setup, and wage and tax amounts
    • After that identify the tax amount discrepancies on flat rate tax. The tool will further cater suggestions on the processes to fix problem
  • The next step is to run a payroll summary report for the quarter you wish to adjust.

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Step 2: The second step is to adjust payroll liabilities

  1. Herein, the user is required to move to the employees menu and then the payroll taxes and liabilities and also choose Adjust payroll liabilities option – Screenshot.
Adjust payroll liabilities option - Screenshot
  1. The user is then required to use these tips to help completing the fields
    • Also, using the same date as the last paycheck of the affected quarter is suggested. And also, the user should use today’s date if he/she is working on the current quarter
    • Moreover the effective date is used to calculate the amounts on the 940 and 941 forms, along with payroll liability balance report.

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Check if the adjustment is for the company or an employee?

  • If yes, then select employee adjustment, if the item being adjusted is a company paid item. This updates the YTD info reported on the employee W2 form.
  • The user needs to select the company adjustment if he/she needs to remove the balance from the payroll liability balance report.
  1. After that select the employee.
  2. And complete the taxes and liabilities fields
    • Now, choose the item name that is to be adjusted
    • Further, entering the amount of the adjustment is recommended. The user needs to use a positive number to increase or negative to decrease the amount.
    • Also, the wage base is rarely required, even when the user needs to override a tax amount on the paycheck.
    • The user needs to use income subject to tax when making a wage base adjustment.
    • You can also make use of the memo field to enter a note about the adjustment for further reference.
  3. The user is then required to select accounts affected and hit ok tab
    • Choose the do not affect accounts, so as to leave balances unchanged for the liability and expense accounts. The adjustment will change the year to date amounts.
    • Now, select the affect liability and expense accounts to enter an adjusting transaction in the liability and expense accounts
  4. The last step is to repeat the steps for other employees in case you need to and hit OK tab.

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Step 3: Under this step the user should ensure that the liabilities are updated

The user needs to run the payroll summary report again to ensure everything looks right.

Step 4: Perform the steps to correct the payroll liability check

Under this step, the user would have to correct the liability check in QuickBooks.

  • The user should first move to the banking tab and select use register.
  • After that select the register used for payroll and hit ok tab
  • The next step is to right click the liability check and choose edit liability check
  • Now, move to the payroll liabilities and update them to match the changes
  • End the process by selecting save and close and hit yes tab.

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Final Words..!

Now that you know what all it takes to make adjustments in payroll liabilities in QuickBooks, it is time to implement those changes successfully. However, if you are not having the proper knowledge to make those changes, then we suggest you not experiment to avoid any sort of further mess. You can simply get in touch with our experts at 1(844)521-0490and let them perform the process and successfully adjust payroll liabilities. With the knowledge and experience our team possesses, they will ensure to help you with the complete process in a hassle-free manner.


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