As each payroll is processed, we debit the required payroll taxes that apply—we then pay and file taxes and forms.
If adjustments are made that affect the amount of taxes owed (after payrolls have already processed, or forms filed), you may be liable to pay more to federal or state agencies.
To properly account for the changes and calculate tax differences, we run a “tax reconciliation” payroll to make sure the correct tax amounts have been paid and reported to each agency. When these types of payrolls are processed, you may see that:
We'll need to debit your company for tax amounts owed based on the updated information, or;
We'll be crediting (refunding) your company for taxes that may have been overpaid (if we're still holding on to the funds).
Tax Reconciliation Causes
Some tax reconciliation payrolls happen automatically as a result of changes to your account, or on a quarterly basis (to correct potential tax discrepancies ahead of filing). Other times, they may be run by our team, as needed, as a response to one of the situations below.
State unemployment rate change: This occurs when your State Unemployment Insurance (SUI) rate changes for the current quarter due to reasons specified by the state unemployment department.
This debit typically happens at the end of the quarter.
FUTA credit reduction states: This occurs if you're an employer in a credit reduction state, and a higher tax is due on federal Form 940.
This debit typically happens at the end of the year.
Non-Gusto payrolls: When you add or remove a non-Gusto payroll, it may impact how previous payrolls should have been taxed. If additional taxes are owed, we'll debit your account and send the tax amounts to the applicable agencies.
Work/home location changes: If your company or an employee has a change in work or home location, you may be liable to pay more to the federal and state agencies.
Benefit adjustments: Changes to benefits can also change taxes owed.
Exemptions: Adding or removing a tax exemption can result in an increase or decrease in taxes owed.
View Your Tax Reconciliation Debit(s)
If you're notified about a Tax Reconciliation payroll, it will appear in the Payroll section of CleanCloud—alongside your Regular Payrolls and Off-Cycle Payrolls.
Tax reconciliation email(s) and next steps
Email notifications are sent when a tax reconciliation payroll results in a debit greater than $5.00.
The email will notify you of the factors that impacted the tax reconciliation, the adjustment period, the last four digits of the bank account that will be debited, the debit date, any applicable taxes, and the total debit amount.
The debit typically occurs a few business days after you receive the email.
In certain cases, you may receive an email about a refund from Gusto—we'll let you know if there's any action required on your end, like reimbursing employees for overpaid taxes.
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