Get Ready: Changes to QuickBooks Payroll Taxes Start December 31, 2024

Starting December 31, 2024, QuickBooks Online Payroll will change how it handles automated payroll taxes for businesses in Maryland and other states that haven't seen this shift yet. Instead of making payroll tax payments on their due dates, QuickBooks will now withdraw payroll taxes every time you process payroll or adjust amounts owed.

While some users have expressed frustration, viewing this as just another way for QuickBooks to benefit from holding their tax funds, there are important advantages for your business. With proper preparation, you can turn this change into a valuable opportunity to streamline your payroll processes and maintain better control of your cash flow.

Let's dive into what this change means for your business and what you need to do to be ready.

Why This Change is a Good Thing

Though there may be some concern about Intuit holding onto funds before taxes are due, this change offers several key benefits for business owners:

• More Predictable Cash Flow Management
  Taxes will now be withdrawn every time payroll is processed, spreading out payments over time and avoiding large lump-sum withdrawals at the end of a quarter or tax period.

• Lower Risk of Missed Payments or Penalties
  With taxes being withdrawn automatically each pay period, the risk of missing filing deadlines or incurring penalties is reduced.

• Greater Visibility and Transparency
  You'll know exactly how much will be withdrawn with each payroll run, and you can track past and upcoming withdrawals in the Payroll Tax Center.

• Simplifies Year-End Taxes
  Since payments are made throughout the year, you'll likely find that tax season becomes much smoother—without surprise payments catching you off guard.

Timeline: What's Happened and What's Next

For New QuickBooks Payroll Subscribers

• August 2024 to October 2024:
  The new tax withdrawal process rolled out for new QuickBooks Payroll customers during this period. All new subscribers to QuickBooks Payroll after August 1, 2024, have already been set up under the new system.

For Existing Customers in 11 States

• October 1, 2024:
  Businesses in Arizona, California, Florida, Georgia, Illinois, Kansas, Nevada, North Carolina, Tennessee, Texas, and Virginia saw this change take effect. QuickBooks notified these customers beginning July 1, 2024, and made a one-time withdrawal on October 1 for any unpaid FUTA taxes to bring accounts up to date.

For All Remaining States (Including Maryland)

• December 31, 2024:
  The new system will take effect for all remaining states, including Maryland. Businesses in these states received notifications from QuickBooks starting October 1, 2024, urging them to confirm whether they wish to continue using automated taxes. No one-time FUTA withdrawal will be required, as the transition occurs at the start of the new tax year.

What You Need to Do

1. Review the Updated Terms of Service
   The new Terms of Service took effect on August 1, 2024. Be sure to read these changes so you understand how tax impounding will affect your business.

2. Confirm Your Consent by December 31, 2024
   In your Payroll Overview section in QuickBooks Online, follow the prompts to "Keep Using Automated Taxes." You'll need to do this to continue with automated payments in 2025.

3. Check Your Bank Account Setup
   Ensure your bank account linked to payroll has enough funds to cover both direct deposit and tax withdrawals on payroll days. Remember that tax payments and direct deposits will be withdrawn separately, so proper planning is key.

4. Educate Your Payroll Team
   If you have staff managing payroll, make sure they understand the new withdrawal process. They will need to track tax payments and preview withdrawal amounts during payroll runs to stay ahead of cash flow needs.

Our Recommendation

If your business relies on automated payroll through QuickBooks, this change can actually simplify your operations. Rather than scrambling to cover lump-sum tax payments or worrying about filing deadlines, you can:

• Keep Automated Taxes Enabled
  Stick with the automated process to ensure your taxes are always paid on time and in full, with no added stress.

• Plan for Regular Withdrawals
  With each payroll, taxes will be withdrawn automatically, so adjust your cash flow forecasting accordingly. If cash is tight, consider processing payroll earlier to manage withdrawals more effectively.

• Communicate with Your Accountant
  If you're unsure how this change impacts your business or want advice on how to prepare, reach out to your accountant (or us!) for guidance. Proactive planning will ensure your business thrives under this new system.

Closing Thoughts: Make 2025 Smooth and Stress-Free

Although some QuickBooks users may view this as an unnecessary change, impounding taxes each payroll run actually protects businesses. It reduces the chances of missed payments, helps with budgeting, and keeps you compliant with tax laws—all without the headache of manual filings.

Don't wait until the last minute. Log into your QuickBooks Payroll account, confirm your settings, and get ready for a smoother 2025.

This small adjustment can make a big difference in how you manage payroll taxes. Take action now and turn this change into an opportunity to simplify your operations. 

If you have questions or need assistance navigating the new process, feel free to reach out—We're happy to help you get set up and avoid any payroll surprises.

Speaking of payroll changes, don't miss our blog post on the New Pay Statement and Pay Transparency Laws Effective October 1, 2024, in Maryland. Stay informed to ensure your business stays compliant!