If your QuickBooks Payroll isn’t deducting taxes from employee paychecks, it can lead to compliance problems and financial discrepancies. This frustrating issue can occur due to multiple reasons, ranging from setup errors to incorrect tax tables.
In this guide, we’ll walk you through why QuickBooks Payroll is not taking out taxes, how to fix it, and what steps to take to ensure smooth payroll processing in the future. You’ll also find a FAQ section and a direct line to our support team at +1-855-954-6208 or +1855.954.6208.
🔍 What is the “QuickBooks Payroll Not Taking Out Taxes” Issue?
When this error occurs, QuickBooks calculates zero or incorrect tax deductions (Federal Income Tax, Medicare, Social Security, or state taxes) in your payroll. It may reflect as “0.00” for specific tax categories or result in under-withholding.
This issue can affect both salaried and hourly employees, leading to incorrect payroll liabilities and W-2 filings if not resolved.
⚠️ Common Reasons Why QuickBooks Payroll is Not Deducting Taxes
There are several potential causes for this problem:
1. ❌ Employee Tax Setup Is Incomplete
If an employee’s tax details (like W-4 form entries) are missing or incorrectly configured, QuickBooks may skip tax deductions.
2. 🧾 Outdated Payroll Tax Tables
Not updating your payroll tax tables can cause miscalculations or non-deductions.
3. 🧑💼 Employee Marked as Exempt
If an employee is mistakenly set as “exempt” from taxes, QuickBooks will not deduct them.
4. 🗓️ Payroll Date Error
If the payroll falls outside the correct tax year or payroll schedule, the system may skip taxes.
5. 📊 Earnings Are Below Tax Threshold
For certain employees, low earnings in a pay period may not meet the taxable wage threshold, resulting in no tax being withheld.
6. ⚙️ Company Payroll Settings Issue
Improper tax setup at the company level can affect all employee deductions.
🛠️ How to Fix QuickBooks Payroll Not Taking Out Taxes
Here’s a step-by-step troubleshooting guide to help you resolve this issue:
✅ Step 1: Check Employee Payroll Tax Setup
Go to Employees > Employee Center.
Select the affected employee and click Payroll Info.
Click Taxes and review the following:
Federal tab: Make sure the filing status and allowances match their W-4.
Ensure the employee is not marked as exempt from federal or state tax.
Save changes and re-run payroll to see if taxes are now calculated.
✅ Step 2: Update Your Payroll Tax Table
Open QuickBooks Desktop.
Click Employees > Get Payroll Updates.
Check Download entire payroll update and click Update.
Restart QuickBooks after the update.
Having outdated tax tables is a common culprit, so always keep them current.
✅ Step 3: Verify Employee Earnings
Ensure that the employee’s earnings are above the minimum taxable wage for deductions to apply. If they're too low, federal or state taxes might not be withheld automatically.
Example:
Federal taxes may not apply to earnings under a certain threshold per pay period.
Consider checking the IRS Tax Withholding Estimator for accuracy.
✅ Step 4: Correct Exempt Status (If Wrong)
If an employee was marked as exempt by mistake:
Go to the Employee Profile > Payroll Info > Taxes.
Remove the checkmark for “Exempt” under the Federal or State tab.
Save changes and rerun the paycheck.
✅ Step 5: Review Company Payroll Settings
Go to Edit > Preferences > Payroll & Employees.
Click the Company Preferences tab.
Review tax settings to ensure that applicable taxes are set to be calculated.
✅ Step 6: Run Payroll Checkup Tool
Go to Employees > My Payroll Service > Run Payroll Checkup.
Review warnings and fix any detected errors.
Rerun payroll once all configurations are corrected.
This tool will help you verify whether all taxes and deductions are correctly applied.
✅ Step 7: Create a Test Paycheck
After fixing the setup, create a dummy paycheck for the affected employee to ensure taxes are being correctly calculated before processing actual payroll.
🆘 Still Not Working? Contact Our Support Team
If the issue persists after following all steps above, it may be due to deeper configuration errors or file damage. We recommend contacting our QuickBooks Payroll Support Team at:
📞 +1-855-954-6208 or +1855.954.6208
Our experts are available 24/7 to guide you through advanced troubleshooting and ensure payroll accuracy.
📘 FAQs – QuickBooks Payroll Not Deducting Taxes
❓Q1: Why is federal income tax not being withheld from employee paychecks?
A: It may be due to incorrect W-4 setup, employee marked as exempt, or low earnings that don’t meet taxable thresholds.
❓Q2: Will QuickBooks fix past paychecks where taxes weren’t deducted?
A: No, QuickBooks won’t auto-correct past paychecks. You’ll need to delete and recreate those checks or make manual tax adjustments.
❓Q3: Is it mandatory to update the payroll tax table every time?
A: Yes. Keeping your tax table updated is essential for accurate tax calculations. Outdated tables can skip or miscalculate deductions.
❓Q4: Can QuickBooks Online have the same issue?
A: Yes, incorrect employee setup or exemptions can also cause tax deduction issues in QuickBooks Online Payroll.
❓Q5: Can I fix this issue without redoing payroll?
A: You can update the employee profile and tax settings to ensure future paychecks are accurate, but past ones may need reprocessing.
🧾 Final Words
The “QuickBooks Payroll Not Taking Out Taxes” issue can seriously impact your payroll accuracy and compliance. While it may stem from a simple setup error or exemption, ignoring it can lead to tax penalties or employee dissatisfaction.
Take time to review each employee’s tax profile, keep your payroll updated, and verify that your company settings are correct. When in doubt, don’t hesitate to get expert help.
Call our payroll experts now at +1-855-954-6208 or +1855.954.6208 for professional assistance. We're here to help you fix payroll problems fast and accurately.