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dtait-ganzetax-c
January 24, 2024
Question

How to pay futa credit reduction amount

  • January 24, 2024
  • 1 reply
  • 0 views
form 940 has an amount due for the credit reduction

1 reply

JaeAnnC
JaeAnnC
January 24, 2024

Thanks for reaching out to us, Dtait. Allow me to share information on how you can pay the Federal Unemployment Tax Act (FUTA) in QuickBooks Online (QBO) with credit reduction.

 

QBO automatically calculates the FUTA credit reduction tax at year-end. 

 

If you've enabled automated taxes and forms, we'll add the additional amount for FUTA credit reduction to your final FUTA payment for the year, and add the appropriate line items when we file Form 940. 

 

If you pay and file manually, you'll see the additional FUTA amount when you attempt to create your final FUTA payment for the year. Once you approve the payment, all applicable fields will be populated when you generate Form 940 in QBO.

 

Here's how to pay:

 

  1. Go to Payroll and select Payroll Tax.
  2. In the ACTION NEEDED section, locate the Federal Unemployment (940) and click Pay.
  3. Fill in the necessary fields and select Record Payment.

 

Further details are shared in this article: Understand Federal Unemployment Tax Act (FUTA) Credit Reduction States.

 

Moreover, I'm sharing this list of payroll reports that will be beneficial whenever you need an overview of employee wages, taxes, and contributions: Run payroll reports.

 

Keep in touch if you need additional guidance in recording FUTA payments in QBO. I'll be happy to assist you every step of the way. Stay safe.

N
Nancyh1029
January 4, 2025

Hi,

I have the same issue but I am on desktop with enhanced payroll.  The extra charge that must be paid that populated on the 940 report from quickbooks shows in the 4th quarter the correct amount for the FUTA credit reduction for New York State. However, in Paid Liabilities it does not show the extra charge. How do I manually correct the accounts in Quickbooks Payroll to show the FUTA Charge on the 940?

Thanks.

Nancy

Clark_B
Clark_B
January 4, 2025

It's nice to have you here in the Community, Nancy. I'm here to ensure that the FUTA credit reduction for New York State is reflected in the Pay Liabilities section.

To begin with, the credit reduction amount will not automatically appear in the pay liabilities section of the payroll center. You'll need to adjust the liability manually to include it in the Federal 940 tax. To verify, run the payroll liabilities report to ensure that the liability and expense accounts are accurately reflected. If they are not, follow the steps below:

 

  1. Navigate to Employees and choose Payroll Taxes and Liabilities.
  2. Click on Adjust Payroll Liabilities.
  3. Set the Date and Effective Date to the last paycheck date of the year in question.
  4. In the Adjustment is for section, choose Company.
  5. Select Federal Unemployment under the Item Name column.
  6. Enter the credit reduction amount in the Amount column.
  7. Add a note in the Memo field for reference.
  8. Click on Accounts Affected, then OK.
  9. Ensure that Affect liability and expense accounts are selected to update the accounts.
  10. Click OK twice to complete.

 

For more detailed information on how QuickBooks calculates the FUTA credit reduction, please refer to this article: Understand FUTA Credit Reduction States.

 

You can also check this article to learn more about using liability adjustments to correct employees' year-to-date or quarter-to-date figures: Adjust payroll liabilities in QBDT.

 

If your unemployment taxes are increased retroactively, then you might see it underpaid. This article provides guidance on correcting the calculations and payments in QBDT: Enter historical tax payments in Desktop payroll.

 

Please know you can rely on the Community team whenever you need help with FUTA credit reduction or adjusting payroll. We'll be happy to provide support. 

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