Correcting a Tax Rate After Payrolls Have Been Processed
Overview
If a tax rate needs to be updated after payrolls have already been processed, the system can accommodate the change and ensure accurate filings and remittances going forward. This article explains how to update the rate and what to expect afterward.
How to Update the Tax Rate
- Navigate to the Employer Tax Information section.
- Update the tax rate to the corrected rate provided by the taxing authority.
- Backdate the effective date of the change to the beginning of the applicable period (e.g., January 1, 20xx)
What Happens Next
- Automatic Recalculation: When the applicable tax form is filed (e.g., during the April filing period), the system will automatically recalculate the tax liability using the updated rate.
- Adjusted Remittance: Only the amount reflected on the finalized form will be remitted to the taxing authority — not the higher amount originally collected.
- Refund of Excess Funds: If over-prefunding occurred due to the previously higher rate, the excess funds will be refunded to your client. Refunds are typically issued around the 7th of the month following the close of the compliance period.
Key Takeaways
- Updating the tax rate and backdating the change ensures accurate reporting going forward.
- No manual adjustment to prior payrolls is required — the system handles the recalculation at filing time.
- Over-prefunded amounts are automatically refunded after the compliance period closes.