How to Change QuickBooks Payroll After a Tax Deduction to Pre-Tax Deduction

Changing an After-Tax Deduction to a Pre-Tax Deduction in QuickBooks

There will be times when you will have to change a payroll item in your QuickBooks file. It is not a complicated process, but it is important to follow each step or risk corrupting the company file. The consequences of changing a payroll item can mean refiling payroll taxes, making adjustments for year to date amounts on an employees' paycheck or the pleasant task of letting the employees know that they have a little money being refunded back to them because of the difference between the after-tax and pre-tax deductions.

Things You'll Need

• Amended payroll tax forms
• Year to date payroll summary report

Instructions

1. Back-up your company file before making any changes. Name this file to indicate that this is the one that is prior to changes to payroll. Print a Payroll Summary report for year to date amounts for each employee and set it aside.

2. Create new payroll item for the pre-tax deduction. Open the item list found in the lists section of the top menu bar. Click on the "Payroll Items" list. Find the tab at the left bottom corner of the page labeled "Payroll Item" and click on it. A menu will pop up and the top choice will read, "New Payroll Item," click on it.

3. Follow the "New Payroll Item" wizard. Select either the E-Z set up or the Custom method. Choose the category of payroll deduction that you want to change and click the "Next" box. Select who pays for this payroll benefit and click "Next."

4. Choose the vendor to whom the payments are made, the frequency of payment and any account numbers being used. Click on the 'Finish' button. When you see your new payroll item on the payroll item list, click on it and open up the Edit Screen. Choose the taxes that are affected by this deduction on the fourth screen labeled "Taxes." Check the withholding, unemployment and both Social Security and Medicare deductions. Click "Finish."

5. Adjust for any year to date amounts in the After Tax category. Take the Payroll Summary report you printed earlier and look for the year to date amounts in the after tax category that needs to be changed. Click on Employee's menu and scroll down to the "Payroll Taxes and Liabilities" tab and click, then choose "Adjust Payroll Liabilities."

   Choose the deduction you want to change and zero out the negative year to date number with an identical amount in the positive. Do this for each employee. Run a new payroll summary report to make sure the "after-tax" items have been zeroed out.

6. Run a new Payroll Summary Report and compare it to the previous one. If there are substantial changes that would affect a companies' payroll taxes paid, file an amended return for the 941's with the incorrect amounts on them.

References

• Intuit Payroll Support: Health Savings Account Employee Deduction
• QBalance.com: Using QuickBooks Payroll Tips and Tricks