Form 941 line 2 does not match adjusted gross wages in Payroll Summary report

 

The Adjusted Gross Pay in your Payroll Summary report does not match the wages reported on Form 941, line 2 (wages, tips, and other compensation).

What is Line 2 of the 941?

Line 2 is Wages, tips and other compensation.

Line 2 is comprised of Total Gross Pay plus any gross pay additions (i.e., tips), any company contributions that are taxable to federal withholding, (i.e. taxable GTLI, company car), minus all pretax deductions (i.e., 125 plans and 401(K)).

If you double-click on the total amount for Federal Withholding on the Payroll Summary report and scroll to the bottom, the amount in the Income Subject to Tax column should match Line 2 of the 941.

  • Assisted Payroll 941/944 Forms do not include GTLI amounts on Line 2. GTLI isn't taxable to federal withholding at the paycheck calculation (the Tax Tracking Type of Taxable Grp Trm Life doesn't have the taxability check mark set on the Payroll Item in QuickBooks Desktop). As a result, this doesn't get sent to the payroll service correctly for the GTLI amounts to be reported. If you see an error on your form that requires correction or amendment, contact Intuit for assistance.

This discrepancy can occur because:

  • You have Company Contribution Items (for example, fringe benefits, S Corp, GTLI) that were reported on Form 941 line 2.
  • Payroll items are set to calculate using gross pay in the payroll item setup.
  • Incorrect tax tracking was used for a payroll item.

To determine what is causing the wage discrepancy:

  1. Create a Payroll Summary report for the quarter in question.
  2. View all of the payroll items reported in Deductions from Gross Pay. If any of these items should not be listed here, you must move them to Deductions from Net Pay. (For example, an employee 401(k) loan should not be listed as a deduction from gross pay.)

    To change how payroll items are reported in the Payroll Summary report:

    1. Choose Lists > Payroll Item List.
    2. Double-click the item that is reported incorrectly.
    3. Click Next until you get to the Gross vs. Net window.
    4. Select either gross pay or net pay, depending on where you want this item reported on the Payroll Summary report.
      • Note: If you change the Gross vs. Net setting and you are using a percentage in QuickBooks Desktop, this changes the way QuickBooks Desktop calculates the payroll item on paychecks. If you do not use a percentage, this change does not affect payroll.
    5. Check if there are discrepancies in the tax amounts.
  3. View all the payroll items in Employer Taxes and Contributions. Company contribution items that affect Form 941 line 2 are not reflected in Adjusted Gross Pay. Add or subtract amounts as needed.
  4. If all payroll items are reporting correctly in the Payroll Summary report, incorrect tax tracking for a payroll item might cause the discrepancy. (For example, an employee 401(k) loan has a tax-tracking type of 401(k). This is incorrect and should be reported as None.) To verify that all payroll items are set up with the correct tax tracking type, run a Payroll Item Listing report.

    To create a Payroll Item Listing report:

    1. Choose Reports > Employees and Payroll > Payroll Item Listing.
    2. Check the Tax Tracking Type in the column on the right.
    3. If the payroll item has an incorrect tax tracking type, you might need to file amendments for the affected quarters.

     

941 Line 10 is not equal to line 16

 

When you click the Check for Errors button on 941 form and receive the following message:

Error on Form 941: Total taxes adjusted by EIC does not equal the total quarter liability on page 2. You must make necessary adjustments to reconcile the amounts. If you have Hire act qualified employees, please check and adjust your data for any errors.

Line 10 is calculated using percentages (Social Security and Medicare) of the employees' wage bases - in addition to the Federal Withholding amount on the employees' paychecks and liability adjustments.

Line 16 is based on the total amount of Federal Withholding, Medicare Employee, Medicare Company, Social Security Employee and Social Security Company on the employees' paychecks and liability adjustments.

Line 10 may be incorrect due to:

  • Incorrect Payroll Item setup
  • Incorrect Payroll Liability Wage Base adjustments
  • Incorrect or unnecessary Federal Withholding adjustments
  • Incorrect YTD entries

Line 16 may be incorrect due to:

  • Incorrect Payroll Liability amount adjustments
  • Incorrect taxes entered on Year-to-Date Payroll entries
  • Taxes were incorrectly edited on employee paychecks
  • Tax tables were outdated during paycheck creation

If the amount of Social Security Employee and/or Medicare Employee was incorrect, refund or withhold the amount difference from your employees.