Is QuickBooks Payroll not taking out taxes? Discover the top reasons, step-by-step solutions, and how to fix tax deduction issues fast.
QuickBooks Payroll is designed to automate tax calculations and ensure timely deductions. But what happens when it stops withholding taxes correctly? Whether you’re a business owner or payroll manager, this can lead to serious compliance issues, penalties, and payroll confusion. In this guide, we’ll explain QuickBooks Payroll Not Taking Out Taxes, how to fix it step-by-step, and where to get expert help fast.
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This issue arises when federal, state, or local payroll taxes are not being automatically deducted from employee paychecks during payroll runs. It can affect:
Federal Income Tax
State Income Tax
Medicare and Social Security (FICA)
Unemployment Tax (FUTA/SUTA)
You may first notice this when previewing paychecks, running reports, or getting notices from tax agencies.
Several factors can cause this issue. Let’s look at the most common:
If employee profiles are not configured correctly—such as exempt statuses or incorrect state/residency data—QuickBooks won’t take out taxes.
Outdated payroll tax tables update can miscalculate or skip deductions entirely.
Certain earnings items (e.g., reimbursements or bonuses) may be marked as non-taxable by mistake.
QuickBooks may not withhold federal taxes if the income doesn’t reach a taxable limit based on W-4 selections.
If your business EIN or tax setup is missing or incorrect, the payroll system may fail to apply taxes.
Use these verified troubleshooting steps to solve the issue:
Go to Employees > Choose the affected employee.
Click Payroll Info > Taxes tab.
Review:
Federal Filing Status
Allowances/Exemptions
State Tax Information
Ensure the “Subject to” boxes are properly checked.
🔁 If the employee is marked as “Exempt,” taxes will not be deducted. Uncheck that option if incorrect.
From QuickBooks, go to Employees > Get Payroll Updates.
Check Download Entire Update.
Click Update.
💡 Keeping tax tables up to date is crucial to proper withholding.
Go to Lists > Payroll Item List.
Right-click any custom earnings item (e.g., Bonus) > Edit Payroll Item.
Click through until you reach Tax Tracking Type.
Make sure it’s set correctly (e.g., Compensation, Bonus).
⚠️ If set to “None,” no taxes will be deducted.
Delete the paycheck (if it hasn’t been processed).
Go back and recreate the paycheck after fixing settings.
Check if taxes are now being deducted.
From top menu, go to Employees > My Payroll Service > Run Payroll Checkup.
Follow prompts to detect and fix employee tax setup issues.
If you’ve tried the above and taxes are still not being deducted, you may be dealing with a file corruption, regional compliance issue, or need manual backend correction.
📞 Call the QuickBooks Payroll Support Team at +1 (855)-738-0359
Available 24/7 to help resolve payroll and tax-related errors fast.
Employees marked as “Exempt” or with high withholding allowances may not have federal taxes withheld. Check their W-4 setup.
You may face IRS penalties, interest, and audit flags. Always verify taxes before submitting payroll.
At least once per payroll period or whenever notified by QuickBooks. Major updates usually come quarterly.
Yes. Items like reimbursements or allowances are often non-taxable. Make sure your regular wages are taxable items.
Check if the employee’s wages have exceeded the federal and state minimums for withholding. Some new hires may fall below thresholds initially.
Payroll tax errors can cost your business thousands. If QuickBooks Payroll isn’t deducting taxes properly, take action immediately using the steps above. For persistent issues, don’t hesitate to reach out to professionals.
📞 Get QuickBooks Payroll Help Now — Call +1 (855)-738-0359
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