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E
ebo8302
February 4, 2025
Question

QBDT Withholding the Wrong Amount of Federal Income Tax

  • February 4, 2025
  • 1 reply
  • 0 views

Now that W2 season is over and my employees are starting to do their tax returns, I've had several employees mention to me that they owed on their federal taxes, and asked me to double check their withholdings.

 

It appears that everyone is listed correctly (Single, Married, etc.) with the appropriate number of allowances.

HOWEVER - While digging further, I noticed that QBDT is not deducting the appropriate amount of Federal Income Tax.

 

Examples:

Salaried Employee, making $46,630/year, Single, No Allowances, Paid Weekly ($896.73)
Federal Income Tax is 12% - so it SHOULD withhold about $107.61/week
Instead, QBDT is withholding only $68

Hourly Employee, making $19.5/hour, Single, No Allowances, Paid Weekly ($780 @ 40hrs)
Federal Income Tax is 12% - so it SHOULD withhold about $93.60/week
Instead, QBDT is withholding only $54

I could go on and on, but each and every single one of my employees is in the same situation... Their information on the Taxes tab in their Employee Profile is correct - But QBDT is withholding a much lower rate than it should be.

All of the payroll updates have been run, so it's up to date. I have run "Verify Data" under "Utilities" and there's no issues found. Same with "Run Payroll Checkup"... no issues found.

Worst part is, QBDT doesn't allow users to go in and manually adjust the tax percentages. Yes, I understand on the Taxes tab in the Employee Profile you can enter in additional withholdings, but when most of my employees are hourly employees who get overtime on a weekly basis but the amount changes from week to week, this isn't helpful because you have to enter a dollar amount and can't enter in a percentage.

I also tried to create a payroll item for additional withholding, but QBDT doesn't allow for that either, and the only way to do it would end up messing up everyone's W2's, so no thank you. 

Has anyone found a fix for this???

 

1 reply

S
Shania_C
February 4, 2025

Thank you for reaching out to the Community forum with such detailed information, @ebo8302. I'll provide insights on incorrect Federal Income Tax withholdings in QuickBooks Desktop.

 

QuickBooks Desktop (QBDT) accurately calculates Federal Income Tax (FIT) withholding based on the wage bracket method, as outlined in IRS Pub 15-T, and not through an annualized percentage method. This approach ensures that FIT amounts are tailored to each paycheck, depending on variables such as bonuses or additional pay that might cause fluctuations throughout the year. Furthermore, the calculations adhere to the most recent 2025 tax table. 

 

For instance, a single, weekly-paid employee earning between $895 and $905 would have a federal withholding of $69.

 

For additional details, you can refer to this article: Understand how your payroll taxes are calculated.

 

In addition, here is an article you can read about the year-end checklist for preparing your tax forms in QuickBooks Desktop Payroll: Year-end checklist for QuickBooks Desktop Payroll.

 

Furthermore, to learn more about how QuickBooks calculates taxes and understand the tax amounts reported on your paycheck or the year-to-date (YTD) payroll report, you can refer to this helpful article: How QuickBooks calculates payroll taxes. 

 

Feel free to ask follow-up questions about QuickBooks Desktop Federal Income Tax. The Community is always here to assist you, and you're welcome to post new questions as needed. Stay safe!

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