Stopped Social Security and Medicare Withholding out of the blue.

Hi there, Dealseizer.

I appreciate the detailed information you've shared and for performing troubleshooting steps to resolve the issue. I'll provide further instructions to fix the problem to ensure that Social Security and Medicare taxes will calculate correctly.

When the payroll taxes are not deducting from your employee's payroll, you'll have to check the order of the payroll items on the paycheck to determine if the payroll item order is affecting the calculation. If you want the payroll item to calculate based only on the Earnings of the employee, it should be the first item in the Other Payroll Items section of the paycheck. If you want to include certain additions and deductions in the computation, add the payroll item after those items.

Next, verify whether the payroll item is set to calculate based on quantity, hours, or neither. With this, once a payroll item is set to calculate based on quantity or hours, you have to manually enter the quantity or number of hours in the Quantity column in the Preview Paycheck window. I recommend changing the calculation settings of the payroll item.

Here's how:

1. From the top menu bar, select Lists and Payroll Item List.
2. Right-click the payroll item you want to change and click Edit Payroll Item.
3. Choose Next until the Calculate Based on Quantity screen.
4. Change the setting to Neither if this item does not require hours or quantity to calculate.
5. Select Next until you can click Finish.
6. Hit Finish.

After that, verify if the annual limit has been set or reached. Once a payroll item has been calculating correctly in the past and stops calculating on a paycheck, it might be a checkmark in the This is an annual limit checkbox and a default limit set which the employee has reached. To confirm this, please follow the steps below.

1. In the top menu bar, choose Lists. Then, Payroll Item List.
2. Right-click the payroll item you want to change and click Edit Payroll Item.
3. Choose Next until the Limit Type screen.
4. Verify the limit in the bottom box is accurate. If the limit is correct the employee's payroll item should stop calculating at this limit. If the limit is incorrect, update the amount.
5. Below the Limit Type, verify whether if the correct option is chosen.
6. Change the default limit and/or Limit Type selection accordingly.
7. Hit Finish.

For additional information, you can click this article: Payroll items on a paycheck are not calculating or are calculating incorrectly.

Then, I also suggest checking the previous paychecks to confirm if the payroll or the Social Security and Medicare Taxes are over-deducted. That said, the QuickBooks system will automatically be making an adjustment once there's an incorrect deduction in previous taxes.

If the same thing happens, let's run the Verify and Rebuild Data tool in your QuickBooks Desktop. It could be there are data integrity issues for both company files causing this issue. 

Please refer to this article to see details on how QuickBooks calculates taxes to understand the tax amounts reported on an employee's paycheck or the year-to-date (YTD) payroll report: How QuickBooks calculates payroll taxes.

I'd like to know how you get on after trying the steps, as I want to ensure this is resolved for you. Just reply to this post and I'll get back to you. Take care always.