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FAQ: How do I correct mistakes for employee tax amounts I found when balancing the calendar year?

When I balanced my employee tax amounts for the calendar year, I found some mistakes.  How do I correct this?

If there is a regular payroll that will be calculated before the end of the calendar year for the employee, do the following:

  • Complete a deduction/tax adjustment to increase or decrease the employee’s gross for the tax as follows:
    • Leave the Employee and Employer Amount fields blank with No Action entered in the Action field.
    • If the tax was under paid, enter the amount of the gross taxable wages that was under paid in the Gross Amount field and enter Increase Amount or Gross in the Action field.
    • If the tax was over paid, enter the amount of the gross taxable wages that was over paid in the Gross Amount field and enter Decrease Amount or Gross in the Action field.
  • Include the deduction/tax adjustment batch when calculating the next payroll.

OR

If there is not a regular payroll that will be calculated before the end of the calendar year for the employee, complete one of the following depending on who pays the tax:

Tax Paid By Employee and Employer (i.e. Social Security and Medicare)

*If tax was under paid:
Note:  The steps below will refund the employee’s share of FIT (reduce the amount paid in the calendar year by the employee for FIT) to cover (pay) for the employee’s share of the other tax (i.e. Social Security or Medicare).  This will result in the correct amounts being reported and paid for the other tax (i.e. Social Security or Medicare) and the correct gross still being reported for FIT, while having any amount that may have to be paid by the employee for FIT to be accounted for when the employee files his/her tax return.

  • Manually calculate the unpaid tax amount for the employee share and the employer share of the other tax (i.e. Social Security or Medicare).
  • Verify the employee has the necessary amount of FIT previously withheld to cover (pay) for the employee’s share of the other tax (i.e. Social Security or Medicare).
  • Complete a deduction/tax adjustment to refund the employee amount of FIT for the calculated employee’s share of the unpaid tax amount for the other tax (i.e. Social Security or Medicare), as follows:
    • Enter FIT in the Tax ID field for the deduction/tax adjustment entry.
    • Enter the calculated employee’s share of the unpaid tax amount for the other tax (i.e. Social Security or Medicare) in the Employee Amount field and enter Refund of Override Amount or Gross in the Action field.
    • The Employer Amount and Action fields will be disabled.
    • Leave the Gross Amount field blank with No Action entered in the Action field.
  • Complete another deduction/tax adjustment to pay the employee share and employer share (and increase the gross) for the other tax (i.e. Social Security or Medicare), as follows:
    • Enter the ID of the other tax (i.e. Social Security or Medicare) in the Tax ID field.
    • Enter the calculated employee’s share of the unpaid tax amount for the other tax (i.e. Social Security or Medicare) in the Employee Amount field and enter Replace with Override Amount or Gross in the Action field.
    • Enter the calculated employer’s share of the unpaid tax amount for the other tax (i.e. Social Security or Medicare) in the Employer Amount field and enter Replace with Override Amount or Gross in the Action field.
    • Enter the amount of the gross taxable wages on which the taxes were not calculated for the employee in the Gross Amount field and enter Replace with Override Amount or Gross in the Action field.
  • Calculate an extra payroll using a Processing Month and Check Date within the calendar year of the errors and include the deduction/tax adjustment batch, and then update the payroll.

*If tax was over paid:

  • Complete a deduction/tax adjustment to decrease the employee’s gross for the tax as follows:
    • Leave the Employee and Employer Amount fields blank with No Action entered in the Action field.
    • Enter the amount of the gross taxable wages that was over paid in the Gross Amount field and enter Refund of Override Amount or Gross in the Action field.
  • Calculate an extra payroll using a Processing Month and Check Date within the calendar year of the errors and include the deduction/tax adjustment batch; continue with the check cycle as normal and then update the payroll.

Tax Paid Only By Employee (i.e. FIT or SIT)

*If tax was under paid:

  • Complete a deduction/tax adjustment to increase the gross amount of the tax for the employee, as follows:
    • Enter 0 in the Employee Amount field and enter Replace with Override Amount or Gross in the Action field.
    • The Employer Amount and Action fields will be disabled.
    • Enter the amount of the gross taxable wages on which the taxes were not calculated for the employee in the Gross Amount field and enter Replace with Override Amount or Gross in the Action field.
  • Calculate an extra payroll using a Processing Month and Check Date within the calendar year of the errors and include the deduction/tax adjustment batch, and then update the payroll.
    Note:  This will result in the correct gross being reported for the tax for the employee; any amount that may have to be paid by the employee for the tax would then be accounted for when the employee files his/her tax return.

*If tax was over paid:

  • Complete a deduction/tax adjustment to decrease the employee’s gross for the tax as follows:
    • Leave the Employee Amount field blank with No Action entered in the Action field.
    • The Employer Amount and Action fields will be disabled.
    • Enter the amount of the gross taxable wages that was over paid in the Gross Amount field and enter Refund of Override Amount or Gross in the Action field.
  • Calculate an extra payroll using a Processing Month and Check Date within the calendar year of the errors and include the deduction/tax adjustment batch; continue with the check cycle as normal and then update the payroll.