What are tax variances?

Tax variances occur when the amount of payroll taxes that an employee or employer paid over a quarter does not match the amount that should have been paid for the quarter.

Tax variances are calculated by taking the difference between the amounts accrued on each payroll for total taxable wages and the quarterly totals for taxable wages. It could be a debit or credit.

Most variances are identified at the end of each quarter when tax reports are produced; however, in some cases, they can be identified mid-quarter.