QuickBooks Desktop Payroll Taxes Not Being Taken Out: Causes and Fixes

Are you struggling with payroll taxes not being taken out in QuickBooks Desktop? This is a rare, but concerning issue for businesses that depend on QuickBooks to do their taxes correctly.

Typically, QuickBooks payroll calculates taxes automatically. However, there are instances where it might fail to deduct taxes due to specific reasons. How can it be fixed, and why does it occur?

What cause might resolve this issue, and what can you do? This article explores that. By the end of this, you’ll know what to do to solve this problem and how to get your payroll to run smoothly.

Why is QuickBooks Payroll Not Taking Out Taxes?

QuickBooks payroll does not deduct taxes, which can arise from various causes. Here are the most common reasons:

Low Employee Gross Wages:

If the employee’s gross wages are lower than the minimum threshold for tax calculations, QuickBooks might not deduct taxes.

Outdated Payroll Tax Tables:

QuickBooks relies on the latest payroll tax tables to calculate taxes accurately. If the tax table isn’t updated, payroll taxes may not be calculated properly. Make sure that you have an active payroll subscription, and that you’ve downloaded the latest updates.

Annual Salary Limits Exceeded:

In QuickBooks, an employee’s annual salary amount exceeding the tax limit will lead QuickBooks to stop the calculation of taxes for that individual.

Incorrect Employee Tax Setup:

Employee profiles in QuickBooks must include accurate tax information. Missing or incorrect details, such as filing status or exemptions, can lead to payroll miscalculations. Verify the accuracy of each employee’s tax setting in their profile twice.

Unsubscribed or Expired Payroll Service:

Taxes may not be calculated correctly if your QuickBooks payroll subscription has expired or is not activated.

Incorrect Employee Wage and Tax Details:

Tax deductions can be disrupted by misconfigured year-to-date or quarter-to-date wages and tax details.

Payroll Subscription Issues:

If your payroll subscription is inactive or expired, QuickBooks can’t calculate taxes. Check your subscription status and renew it if necessary. There is no active subscription and tax calculations will not work as expected.

Company File Errors:

Corrupt, or damaged firm files may delay payroll tax calculations. The company file serves to store and fetch payroll data into QuickBooks, erroneously if corruption is developed in it, tax deduction errors occur.

Tax-Exempt Employee Settings:

If you have an employee marked as tax-exempt on their profile, QuickBooks won’t help you sort payroll taxes for them. For certain contractors or under certain payroll situations, this is a common setting. Test that employees who shouldn’t have taxes taken out aren’t marked as tax-exempt.

Steps to Fix QuickBooks Payroll Not Deducting Taxes

Addressing this issue requires understanding the root cause and applying targeted solutions. Below are detailed fixes to resolve the problem:

Condition 1: Incorrect Year-to-Date or Quarter-to-Date Wages

If year-to-date or quarter-to-date wage information is inaccurate, follow these steps:

Run an Employee Withholding Report:

• Navigate to the Reports menu.
• Select Employees & Payroll and then Employee Withholding.
• Click on Customize Report to adjust columns and display necessary items.
• Review the report for inconsistencies.

Verify Employee Tax Setup:

• Double-click on the employee’s name in the employee list.
• Navigate to the Payroll Info tab and click on Taxes.
• Ensure federal, state and other tax settings are configured correctly.
• Update filing status, exemptions, and additional withholdings as needed.

Update Employee Information:

Modify inaccurate data and save changes.

Condition 2: Payroll Subscription Issues

If your QuickBooks payroll subscription is causing problems, try these steps:

Save Employee Paychecks:

Save the employee’s paycheck with current calculations.

Manually Enter Tax Details:

Enter withholding and employer match information manually in QuickBooks payroll.

Update QuickBooks Software:

Ensure you’re using the latest version of QuickBooks. To check for updates, go to Help > Update QuickBooks Desktop.

Verify Subscription Status:

Confirm that your payroll subscription is active.

Find Out Where You Stand with Check Payroll Subscription Status

1. Click on the Employees menu.
2. Go to My Payroll Service > Account/Billing Information.
3. Check if the subscription is in action.
4. If it has expired or is inactive, renew your subscription at Intuit’s official site.

Condition 3: Annual Limit Settings

If taxes stop being deducted due to annual limits:

Review Payroll Item Settings:

• Open the Lists menu and select Payroll Item List.
• Right-click on the payroll item and choose Edit Payroll Item.
• Check the Limit Type screen for correct annual or monthly limits.

Update Limit Settings:

• Modify incorrect limits or settings as necessary.

Condition 4: Repair Company File Errors

You can use the QuickBooks File Doctor tool to fix mistakes in company files:

Download and install the QuickBooks Tool Hub.
To access the Tool Hub, choose Company File Issues.
Run the QuickBooks File Doctor and follow the on-screen instructions to repair the file.

Condition 5: Adjust Tax-Exempt Settings

To fix incorrect tax-exempt settings:

Go to the Employee Center.
Edit the employee profile in question.
Under the Taxes tab, uncheck the tax-exempt boxes if applicable.
Save changes and re-run payroll.

Additional Steps for Resolving Tax Calculation Issues

If the above methods don’t work, consider these additional solutions:

Update Payroll Tax Tables:

• Go to Employees > Get Payroll Updates in Open QuickBooks.
• To update the whole file, click on the Select Download Entire Payroll Update and then Update Now.
• After that, the update should be complete.
• Restart QuickBooks after making sure the update runs successfully.

Revert Paychecks:

• Get the employee’s payroll information open.
• Locate the paycheck you have highlighted and then Right click on it and select the Revert Paycheck option.
• This pulls in payroll data and refreshes payroll data enabling QuickBooks to recalculate taxes.

Verify Employee Setup:

• Ensure you confirm accurate state, local, and federal tax setup for employees.

Contact Support:

• If it is still an issue, contact QuickBooks technical support.

Advanced Troubleshooting for Persistent Issues

• Reinstall QuickBooks Desktop
  If payroll issues persist despite following the above steps, consider reinstalling QuickBooks. It can resolve the errors that may affect the payroll functionality due to software. Make sure you are installing from a fresh installation using the Clean Install Tool in the QuickBooks Tool Hub.
• Verify QuickBooks Version
  Ensure you’re using the most current version of QuickBooks Desktop. Updates usually fix payroll-related problems. To check for updates, select Help and update your QuickBooks Desktop.
• Manually Calculate Payroll Taxes
  In extreme cases, you’ll even need to resolve software issues manually and calculate payroll taxes at the same time. Following the IRS and State tax guidelines, these correct tax amounts must be manually entered into QuickBooks.

Avoiding Payroll Tax Calculation Errors

Regular software updates and the correct setup of employees are required to prevent payroll tax issues. Here are some preventive tips:

• Regularly Update QuickBooks:
  To avoid calculating errors, update QuickBooks and the payroll tax table. To be current, schedule automatic updates.
• Verify Employee Information:
  Make it a habit to review employee profiles to be sure all tax information is current. As needed, update exemptions, filing status and withholding amounts.
• Monitor Payroll Subscription:
  Get an active payroll subscription to stay updated on the latest tax ceilings for hassle-free payroll processing.
• Check for Errors Before Running Payroll:
  Verify all of your employee details and payroll items before you send payroll.
• Backup Company Files
  To avoid the loss of or corruption of your company files, create regular backups. You can also save your data securely using File > Create Backup.

When to Contact a Professional

When all the above steps will not resolve the issue, it’s time to consult a professional. Complex payroll problems get diagnosed and fixed with QuickBooks experts. Contact Intuit support or have a certified QuickBooks ProAdvisor help you.

Conclusion

QuickBooks payroll not taking out taxes can seem daunting, but with the right approach, it’s manageable. When you can track down the cause and apply the corresponding fixes listed above, you can recover exact tax digits. While that’s fine, remember to stay proactive with payroll updates and employee setup for a smoother payroll operation. If you are still stuck, feel free to contact QuickBooks support for some expert help.

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