1. The employee's income is not high enough to withhold federal income tax or this employee claimed high number of exemptions
You can test it easily by increasing the payment.
2. On employee set up screen, the "federal income tax" option is unchecked by mistake. You can edit employee tax option to solve this issue.
Issue #2: Wrong Federal Tax Calculation
1. If one employee claimed high number of allowance, it will lower federal income tax.
2. Such issue may be caused by pre-tax deduction. When you generate a paycheck, you can view the summary part. If the Taxable Income is lower than the Gross Income, that means you set up some deduction that is exempt from federal and state taxes.
Solution:You can review each dedution details. If the deduction is set up to be exempt from federal and state tax by mistake, please change the option. After you delete the wrong paycheck, you add new paycheck. You will see the correc federal and state tax amount.
Issue #3: The W4 option change
IRS published the new 2020 Version W-4 with major change: allowances are no longer used for the redesigned Form W-4. All new employees first paid after 2019 must use the redesigned form. Your employees may see more or less federal tax if they change W4 option.
You will see the W4 option when you add/edit an employee's settings.
If you like to calculate federal tax manually, here are the steps: