Automated Payroll Tax Withdrawals: What Small Businesses Should Expect (and Do) with QuickBooks' 2025 Changes

Big Changes Coming to QuickBooks Payroll in 2025

If you're a small business owner using QuickBooks Online Payroll, grab your calendar and circle April 1, 2025. That's when Intuit is rolling out significant changes to how payroll taxes are withdrawn from your account. These changes will affect your cash flow, financial planning, and possibly your peace of mind if you're not prepared.

As your trusted accounting partner, I want to make sure you understand exactly what's changing, why it matters, and most importantly—what you need to do before these changes take effect. Let's break it down in plain language so you can navigate this transition smoothly.

What's Changing with QuickBooks Payroll Tax Withdrawals

1. New Withdrawal Frequency

Currently, QuickBooks withdraws payroll taxes on scheduled due dates, which gives you some predictability for cash flow planning. Starting April 1, 2025, that's changing in a big way.

The New System:

• Taxes will be withdrawn every time you process payroll

• Additional withdrawals will happen whenever there's an increase in taxes owed

• This includes after payroll corrections or tax rate changes

This shift from periodic to per-payroll withdrawals means you'll need to ensure funds are available in your account every time you run payroll, not just on tax due dates.

2. One-Time FUTA Withdrawal

On April 1, 2025, QuickBooks will make a one-time withdrawal for Federal Unemployment Tax Act (FUTA) taxes. This is a special, one-time occurrence as part of the transition to the new system.

3. Mandatory Confirmation Requirement

Critical deadline alert: By March 31, 2025, the primary admin or company admin for your QuickBooks account must confirm that you want to continue using automated tax payments and filings.

You can do this in two ways:

• Select "Continue using automated taxes" in the email notification from QuickBooks

• Navigate to the Payroll Overview section in QuickBooks and select "Keep using automated taxes"

If you miss this deadline, automated taxes will be turned off starting April 1, 2025, which could leave you responsible for manually filing and paying your payroll taxes.

Why Is QuickBooks Making These Changes?

While Intuit hasn't publicly stated all their reasons, these changes likely reflect improvements to their system that:

1. Ensure more timely tax payments

2. Reduce the risk of penalties due to missed deadlines

3. Create a more direct connection between running payroll and paying the associated taxes

4. Provide better visibility into tax obligations

For businesses, there are some potential benefits:

• More frequent withdrawals mean smaller amounts each time

• Less chance of a large, unexpected withdrawal hitting your account

• Better alignment between when you pay employees and when you pay the related taxes

What These Changes Mean for Your Cash Flow

The most immediate impact of these changes will be on your cash flow planning. Instead of planning for tax withdrawals on specific dates, you'll need to ensure you have sufficient funds in your account every time you run payroll.

For example:

• Under the current system: If you run weekly payroll, you might have taxes withdrawn just once a month.

• Under the new system: If you run weekly payroll, you'll have tax withdrawals every week.

This requires a shift in your financial planning approach. Let's look at some strategies to manage this change.

Your Action Plan: What to Do Before April 1, 2025

1. Confirm Your Automated Taxes (Before March 31)

This is non-negotiable. If you miss the March 31, 2025 deadline to confirm, your automated tax services will stop. This means you'll be responsible for calculating, filing, and paying all payroll taxes manually—a significant administrative burden that also carries risk of penalties if deadlines are missed.

Set a calendar reminder now for early March 2025 to ensure you don't forget this crucial step.

2. Review Your Payroll Setup

Take time to verify your tax setup is complete for all jurisdictions where you have employees. This ensures taxes are only withdrawn for the appropriate areas.

Check these specific items:

• Employee tax forms are up to date

• Company tax IDs are correct

• Tax rates are current

• Filing frequencies are accurate

3. Understand the New Auto-Payroll Preview

Going forward, the Auto Payroll preview email will include estimated tax amounts. After each payroll run, you'll receive a receipt email, and your tax center will be updated with the latest information.

Get familiar with these new notifications so you can quickly spot any discrepancies or issues.

Financial Planning Strategies for the New System

1. Revise Your Cash Flow Forecasting

The most successful transition will come from updating your cash flow forecasting to account for more frequent, smaller tax withdrawals.

Consider these approaches:

• Maintain a higher minimum balance in your payroll account

• Create a separate account just for payroll and taxes

• Set up automatic transfers to your payroll account timed with your revenue cycle

2. Adjust Your Banking Habits

With taxes being withdrawn every payroll run, you might consider:

• Moving from monthly to bi-weekly or weekly revenue transfers to your payroll account

• Setting up alerts for low balances in your payroll account

• Establishing a small buffer fund to cover unexpected increases in tax obligations

3. Update Your Bookkeeping Processes

Your bookkeeping procedures may need adjustment to accommodate the more frequent tax transactions:

• Make sure your reconciliation schedule aligns with the increased transaction frequency

• Consider more frequent reviews of your payroll tax accounts

• Double-check that your chart of accounts properly categorizes these tax payments

Common Questions About the 2025 Changes

"What happens if I don't have enough funds in my account when taxes are withdrawn?"

If you have insufficient funds, the withdrawal will fail, potentially leading to:

• Late payment penalties

• Interest charges

• A mark against your account with QuickBooks

• Possible suspension of your automated tax services

To avoid this, maintain adequate funds and set up banking alerts for low balances.

"Can I opt out of these changes but keep using QuickBooks Payroll?"

No. These changes will apply to all QuickBooks Online Payroll users. Your only options are:

• Confirm and continue with automated taxes under the new system

• Don't confirm and handle all tax filings and payments manually

• Switch to a different payroll provider entirely

"Will these changes affect my tax filing deadlines?"

No. The tax filing deadlines remain the same. What's changing is when the money is withdrawn from your account to pay these taxes.

How Your Business Accountant Can Help

Navigating these changes doesn't have to be something you do alone. At Your Business Accountant, we offer several services to help you prepare for and adjust to the new system:

• Payroll System Review: We'll examine your current setup to ensure everything is configured correctly for the transition.

• Cash Flow Planning: We can help you revise your cash flow forecasts to accommodate the new withdrawal schedule.

• QuickBooks Training: Learn how to use the new preview features and understand the updated reports.

• Transition Monitoring: We'll keep an eye on your account during the transition to catch any issues early.

Visit our QuickBooks Online Training page for more information on how we can support your business through these changes.

Key Dates to Remember

Mark these important dates on your calendar:

• March 31, 2025: Deadline to confirm you want to continue using automated taxes

• April 1, 2025: One-time FUTA withdrawal and start of new withdrawal system

• February-March 2025: Ideal time to review your payroll setup and plan for the transition

Final Thoughts: Embracing the Change

While any system change requires adjustment, the new QuickBooks payroll tax withdrawal process offers an opportunity to create more consistent cash flow practices. By planning ahead and understanding the changes, you can minimize disruption to your business.

Remember that the fundamental purpose of these withdrawals—paying your required payroll taxes—remains unchanged. What's changing is the timing and frequency of the withdrawals, which you can adapt to with proper planning.

Need personalized guidance on preparing for these changes? Contact us for a consultation. We're here to help you navigate not just this transition, but all aspects of your small business financial journey.

By taking action now, you can ensure a smooth transition to QuickBooks' new automated payroll tax withdrawal system and keep your focus where it belongs—on growing your business.