Learn how to fix incorrect State Unemployment (SUI) or withholding (SIT).

If an employee's paycheck has an incorrect amount calculated for state unemployment insurance (SUI) or state withholding (SIT), the error is usually caused by incorrect employee state tax setup or payroll item setup.

We explain how to find the error, and resolve it.

SUI: Uncovering the error

For state unemployment (SUI) and state withholding (SIT) to calculate correctly on a paycheck, you must correct any error in the setup before creating a new paycheck.

Before you do anything: Make sure you are using the latest QuickBooks Desktop release and tax table update.

If you're getting an error, you'll need to verify the following to find the cause.

  1. Verify state taxes set up for the employee in the Employee Profile
  2. Verify the SUI rate in QuickBooks Desktop
  3. Determine whether the employee reached the SUI wage base limit
  4. Verify the setup for payroll items used on the employee's paycheck
Note: An employee can have zero state withholding and still be correct. If the employee wages are not high enough to meet the threshold based on their allowances, filing status, and pay period, QuickBooks Desktop does not withhold state income tax.

 

Verify employee's state taxes

To verify the state taxes set up for the employee in the Employee Profile:

  1. Select the Employee Center, and double-click the employee's name.
  2. Select Payroll Info, and select the Taxes button.
  3. On the State tab, verify that the following items are set up correctly:
    • State Worked and State Subject to Withholding
    • SUI is appropriately marked
    • Extra Withholding (extra withholding increases the amount collected for SIT)
    • Filing status
    • Number of allowances
  4. Make any necessary changes to the setup.
  5. Select Ok.

Verify the SUI rate

Check whether the SUI rate in QuickBooks Desktop is correct. The steps to correct an incorrect SUI rate vary, depending on the Payroll service you use.

To verify the rate in QuickBooks Desktop:

  1. From the Lists menu, select Payroll Item List.
  2. Double-click State Unemployment.
  3. Select Next, and select Next again to view the rate.
  4. Change the SUI rate, if incorrect, using one of the following procedures, depending on your payroll service:
  5. Select Next.


    By default, QuickBooks Desktop marks payroll items as subject to, or exempt from, SUI according to your state's guidelines.
  6. Select Next.

  7. Select Finish.

Verify employee's SUI wage base

To check whether the employee has reached the SUI wage base limit, create a Payroll Summary Report:

  1. From the Reports menu, select Employees and Payroll, and select Payroll Summary Report.
  2. Enter the current calendar year-to-date.
  3. Locate your employee's SUI and double-click the accrued amount to open the Transactions by Payroll Item report.
  4. In the Wage Base column, use the wage base total to determine whether your employee has reached the limit.

Note: When an employee reaches the annual wage base limit, QuickBooks Desktop stops calculating SUI on the employee's paycheck. For more information, see current taxes and rates and wage bases limits.

 

Verify payroll item setup

To verify that the payroll items used on the employee's paycheck were set up correctly:

  1. From the Lists menu, select Payroll Item List.
  2. Select the payroll items used on paychecks, including Deductions, Additions, and Company contribution.
  3. Select Next until the Tax Tracking Type window opens.
    The Tax Tracking type determines the taxability of each payroll item and how it is reported on your tax filings.
  4. Read the description to see if the type selected meets your needs.
    If you are unsure the tax tracking type to use, consult your accountant or tax advisor.
  5. Edit any payroll item with an incorrect tax tracking type to make it Inactive.
  6. Create a new payroll item with the correct tax tracking type for the item, and use it on any new paychecks.

If the employee was previously paid with a check that used the wrong tax tracking type, you may need to adjust their year-to-date totals.

To learn more, see Correct year-to-date (YTD) additions or deductions on a paycheck when the wrong tracking type was used.

If you haven't issued the Paycheck yet...

If you have not issued the paycheck, delete the paycheck and re-create it.

To delete the paycheck:

  1. In the Employee Center, select the employee's name to open a list of paychecks.
  2. On the Transactions sub-tab, double-click the paycheck to delete.
  3. Select Edit, and select Delete Paycheck.
    You are prompted when the paycheck is deleted.
  4. Select Ok.

After you delete the paycheck, you must create a new paycheck for the employee. For the steps to create a new paycheck, see Create paychecks.

If you have already issued the Paycheck

If you have already issued the check to your employee, you must adjust or correct the error. The following are common errors to be adjusted.

  • If the SIT amount was over or under-collected, adjust it on the employee's next paycheck.
  • You can manually edit the SIT amount (to decrease or increase) in the Preview Paycheck window when you create the new paycheck.
  • If the SUI amount was over or under-collected, do not edit the amount on the paycheck.
  • To find and fix discrepancies on SUI calculations, you must locate the discrepancies.
  • To find discrepancies, you can run a payroll checkup as an easy alternative method to reviewing payroll reports.
  • Before you run a payroll checkup, it's important to save a back up copy of your data file to protect your data in case an error occurs. For steps and details, see Run Payroll Checkup.
  • To correct employee's SUI quarter or year to date wage base and tax amount, you must make a manual liability adjustment. (See Entering wage base and tax adjustment to correct employee's quarter (qtd) or year to date (ytd) total.) 
Note If you use Quickbooks Desktop Payroll Assisted, call Quickbooks Desktop Payroll Assisted support for assistance before making any corrections to your State Unemployment.

Verify your data integrity

If you have tried all the recommended steps in this article but the calculation error persists, try Verify Data in case you have a data integrity issue.

More information about tax and rate calculations

For more information about tax and rate calculations, see the following articles:

Determine why State Unemployment Insurance (SUI) is not calculating on an employee's paychecks
How to change State Unemployment (SUI) rate in QuickBooks.
QuickBooks calculates payroll taxes (Social Security, Medicare, FUTA, SUI, SDI) incorrectly
What to do if the paycheck appears to calculate incorrectly.
Three methods for calculating federal income tax