Skip to main content
B
Border Collie Boy Part 2
July 26, 2020
Solved

Problem with payroll tax item

  • July 26, 2020
  • 3 replies
  • 0 views

I just discovered that our payroll tax item for state unemployment has been inappropriately including the sick pay component of employee compensation as taxable.    Is there a way to adjust this payroll tax item so that it doesn’t include sick pay?  When I go to the Taxable Compensation screen within the series of Edit Payroll Item screens, Quickbooks will not let me deselect Salary-Sick Pay and gives me the error message that "this type of compensation is always taxable in Quickbooks".  I guess I could set up a separate Payroll Tax Item for state unemployment and use a Tax Tracking Type of None but I’m hoping there’s a better solution.

 

Any help would be greatly appreciated.

Best answer by BigRedConsulting

RE: I just discovered that our payroll tax item for state unemployment has been inappropriately including the sick pay component of employee compensation as taxable. Is there a way to adjust this payroll tax item so that it doesn’t include sick pay?

 

Yes, QB does this for all SUI items. It isn't smart enough to exclude sick pay.  There isn't a way to adjust it.  Still, this isn't usually an issue in the end as employees usually make enough for the year so that their regular pay would have generated the max tax.

 

I've heard that the tax works this works this way in WA state, and that even the state's own payroll system for paying their employees calculates tax on their sick pay.

3 replies

A
AileneA
July 26, 2020

Hello, @Border Collie Boy Part 2. 

 

Thank you for posting in the Community. Let me share some insight into payroll tax items. It uses to track individual amounts on a paycheck and accumulate year-to-date (YTD) wage and tax amounts for each employee. There are payroll items for compensation, taxes, other additions and deductions, and company-paid expenses. 

 

Yes, you can set up another payroll item for state unemployment, Here's how: 

 

  1. From the Lists menu, select Payroll Item List.
  2. At the lower left side, click Payroll Item. The press New.
  3. Press Custom Setup, and click Next. 
  4. Under Payroll item type choose the item and hit Next. 
  5. Input the name of payroll item and press Next. 
  6. Enter the name of Agency and Account number to be paid.  
  7. Select None for Tax tracking type and Next.
  8. Mark check the Taxes and Next. 
  9. Under Calculate based on quantity, select the appropriate calculation. Then Next.
  10. Enter the necessarily information in the field and click Finish once done. 

 

 

 

 

 

 

 

Note: Setting up a payroll item with a tax tracking type of Other can potentially cause problems with W-2 reporting, so be sure to check with your accountant before choosing this solution. 

 

For more detailed steps and information about Payroll tax item, you can check out this article: Set up payroll items for new state taxes.  

 

I will also include these handy articles for additional reference: 

 

 

Drop me a comment below if you have any other questions about setting up payroll item in QuickBooks Desktop. I'll be happy to help you out. Wishing you and your business continued success. Take care always!

B
Border Collie Boy Part 2Author
July 26, 2020

Thanks for the reply but I was hoping for a way to adjust the categories of compensation that are taxed by state unemployment.  As my question stated, I was already familiar with how to set up a separate payroll item with a Tax Tracking type of None.

 

A later reply gave me the answer to my question, however, which was that QB does not have the functionality to edit the state unemployment payroll item.

 

Regardless, I appreciate that you responded to my question.

 

    BigRedConsulting
    BigRedConsultingAnswer
    July 26, 2020

    RE: I just discovered that our payroll tax item for state unemployment has been inappropriately including the sick pay component of employee compensation as taxable. Is there a way to adjust this payroll tax item so that it doesn’t include sick pay?

     

    Yes, QB does this for all SUI items. It isn't smart enough to exclude sick pay.  There isn't a way to adjust it.  Still, this isn't usually an issue in the end as employees usually make enough for the year so that their regular pay would have generated the max tax.

     

    I've heard that the tax works this works this way in WA state, and that even the state's own payroll system for paying their employees calculates tax on their sick pay.

      A
      ailascatering
      October 16, 2023

      we cant run payroll taxes online....it says urgent problem but even QB people cant fix it....wondering why we are paying for this when they dont return calls after they say they will fix.....2 weeks now and not fixed and no one calling us back....NOT HAPPY!

      we had a direct deposit check not work for our empoyee and QB put some unknown bank account on our list of accounts...this is messed up and im pretty sure QB wont see or answer this either!!

      K
      Kurt_M
      October 16, 2023

      We appreciate you joining the thread, @ailascatering.

       

      Please know that we want to ensure you can get through this situation as soon as possible so you can run payroll inside your company file. Also, we want to make sure we're providing the best possible solution to your concerns, and with that said. Can you tell us the specific error message that you received on your end when running payroll? You can also attach a screenshot below. 

       

      You can visit us anytime here in the Community space or leave a comment below. We'll make sure to get back to you right away. Take care!

      Terms & ConditionsAccessibility statement