FUTA question

Your proactive approach to setting up the Payroll Item List for the upcoming year shows your commitment to accurate payroll management, @Deadwood Al. Identifying the reason for the discrepancy between Federal Unemployment Tax (FUTA) wages and those on Form 940 can be challenging. Let's work together to ensure your payroll items are correctly configured.

If I understand correctly, you need a review of the payroll items subject to FUTA. Specifically, you want to determine whether certain items should be included in the calculation of FUTA taxable wages to identify the source of the minor discrepancy between the wages subject to FUTA tax and the wages that are actually reported on your Form 940.

To do this, you can double-click the FUTA payroll item on the Payroll Item List page to see which payroll items are subject to it. Here's how:

1. Go to the Lists menu. Then, Payroll Item List.
2. Locate the Federal Unemployment item and double-click.
3. Click the following Next buttons when prompted until reaching the Taxable compensation section.
4. The table will show which payroll items are currently subject to FUTA.
5. Review each payroll item. If you find any incorrect settings, make the necessary adjustments to ensure accuracy.
   

    

Once done, you might find it helpful to pull up the Payroll Detail Review report. This report will provide detailed information about how QuickBooks calculates tax amounts on employee paychecks and the wage base limit for each employee for each tax. You can follow these steps:

1. Go to the Reports menu. Then, Employees & Payroll.
2. Choose Payroll Detail Review.
   
3. Set the applicable date.
4. Click Customize and select the Filters tab.
5. On the CURRENT FILTER CHOICES section, select the Payroll Item filter.
   a. From the Payroll item dropdown, select the FUTA payroll item.
6. Hit OK when done.
   

    

On the report, verify that the total wages for each employee are correctly capped at the $7,000 wage base limit, as wages above this limit should not be subject to FUTA. Check out this article for more details: Understand payroll tax wage bases and limits.

If the minor discrepancy you're noticing is a penny difference in the amounts shown on payroll reports and tax forms, please know that you don't need to be concerned about those differences. The government understands rounding discrepancies and ignores them. Refer to this article for more info: Why do I occasionally notice penny rounding differences?

Your commitment to getting this right is commendable, Deadwood Al. I hope the details I've shared ensure that your payroll items are accurately set for FUTA tax calculations, resolving the discrepancies you're seeing. If there's anything else you need or if any further questions come up, feel free to click on the Reply button. We're committed to offering ongoing support. Take care!