While preparing paychecks if a payroll item is not calculated or if calculated with errors then you might get incorrect tax total. QuickBooks, however, notifies users at various steps of preparing paychecks and if the recommended method is not followed and the user ignores these recommendations, paycheck might be miscalculated. Various reasons cause this type of error in payroll item calculation on paychecks that you can determine while following the troubleshooting method listed in our article.
Important Points to Consider Before Verifying Payroll Item Calculation
- Make sure you are using the latest version of QuickBooks Desktop software.
- Tax Tables must be updated with the latest released version.
Step 1: Check How a Deduction Item is Set in Payroll
Check how a Payroll item that is meant for tax deduction is set for the calculation, whether it is for gross or net based calculations as it can change the final calculation on paychecks. To verify follow the steps below:
- Open QuickBooks and from the top section select Payroll Item Lists under the Lists option.
- To confirm, right click the deduction and click Edit Payroll Items.
- Hit Next to get the Net/Gross window.
- Now make sure the item is set correctly.
- Hit Next and then Finish.
Every item is set to calculate on a different basis, and for the verification, you can reach out the authority to know how a deduction item should be calculated.
Step 2: Examine How Payroll Items are ordered and if it is causing the Miscalculation
Payroll item calculation depends on the order in which they are selected to be calculated, so it is essential to check how they are ordered for calculation. Verify the following points:
- Under the Other Payroll Items section, make sure employee’s earnings based payroll items are at the top of the list.
- Add any other deductions and additions in the payroll items after the items mentioned in the above point.
Step 3: Check what are the Basis Set for Payroll Item Calculation, whether it is Hours or Quantity
You need to manually enter the quantity and hours of any payroll item that is set to be calculated on hourly or quantity basis. Follow the steps below to change the settings:
- Select Payroll Items List from under the Lists section from the top section.
- Right click the item that needs to be changed and click Edit Payroll Item.
- Hit Next to get the Calculate Based on Quantity window.
- You can select Neither if any item does not need to be calculated on the quantity or hourly basis.
- Click Next and Finish.
Step 4: Check if any Annual Limit is set for Payroll Item Calculation
In case the payroll item suddenly started showing incorrect calculations then there might be a limit set for the employee. To check whether there is a limit set, follow the steps given below:
- From the Lists option at the top, click Payroll Items list.
- Right click payroll item and choose the Edit Payroll Item.
- Hit Next to get the Limit Type window.
- Check whether the limit set is correct and if not then make the required changes to the amount.
- Make sure ( Annual – Restart each year, Monthly – Restart each month, and One-time limit) are selected.
- Make any required change to the limit and click Finish.