Understanding Payroll Tax Variances and Adjustments

This article helps you understand unexpected 7shifts Payroll tax withdrawals or refunds and explains how to read your Reconciliation Recap Report to find answers.

Issue

You may have noticed an unexpected debit (withdrawal) or credit (refund) on your bank statement from our payroll partner, Check Technologies.

This is typically a tax variance, which is a standard adjustment made to ensure the correct amount of payroll tax is paid to government agencies on your behalf. These adjustments are most common after a quarter ends, when all payments are reconciled.

The most common reason for a tax variance is a retroactive tax rate change, where a government agency updates a tax rate and applies it to a previous period. Use the Recap Report to determine next steps! 

What to Do

Review your Reconciliation Recap Report to confirm the cause of the debit or credit. It provides a breakdown of all payroll tax activity and explains any variance.

1. Log in to the web app as an Admin. 
2. Navigate to Payroll > Taxes > Tax Forms.
3. Download the Recap form for the relevant period:
   
4. The report summarizes your tax liability, payments made, and any adjustments. Review the Variance column to see how any difference was handled:
   • Deposit: You had an underpayment of taxes. This line item means our payroll partner, Check Technologies, initiated a debit from your bank account to cover the shortfall and pay the agency correctly.
   • Refund: You had an overpayment of taxes. The full overpayment amount will be refunded directly to your bank account.
   • Credit: You had an overpayment of taxes. The amount was used to reduce the final tax payment of the quarter. This is often related to a tax rate change.
   • Fraction: The difference between the tax owed and payments made was extremely small. This amount is considered negligible and has been written off by Check. No action is taken.
   • Carry: This indicates an overpayment that would typically be applied to the next quarter's tax payments. However, our partner Check’s standard practice is to issue a refund instead of carrying a balance over.

Issue Unresolved

• Variances are a normal part of payroll processing. However, if you would like a more detailed review of the specific tax implications, we recommend consulting with your accountant or tax professional.

•  If you still can’t identify the cause, it may relate to missing tax information (e.g., Tax ID) or a failed filing.
  Employers are responsible for keeping tax details up to date and paying agencies directly if filings fail.

  You can contact 7shifts Support for assistance in identifying the cause. In your message, please provide a clear screenshot of the transaction and bank code. Note that there are associated fees with refile, and you can always opt to refile yourself instead.

FAQs

How can I prevent a tax variance in the future?

While it's not always possible to avoid variances caused by late notice of rate changes from government agencies, you can take proactive steps to help. Best practice is to ensure your tax rates are up-to-date at the start of each quarter and ensure Third Party Administrator (TPA) access is enabled in all your agency portals.

Why was money debited from my account without advance warning from 7shifts?

When you sign up for 7shifts Payroll, you authorize our payroll partner, Check, to manage your tax filings and payments. This agreement allows Check to make necessary debits and credits to ensure your tax liabilities are met accurately and on time.

Was I notified about this variance debit/refund?

Yes. When a debit is initiated, Check automatically sends a receipt via email to the registered Admin of your Check account. Please note that this email receipt is sent as the debit is being processed, not before.

How do I read the bank code on my statement?

For more information on the associated codes, please see this article: Understanding Bank Codes with 7shifts Payroll