Payroll Support

Set up employees as exempt from federal and state tax withholding

Article ID: 1000104

Overview

Some employees might be exempt from federal and state withholding. This article explains how to set them up in QuickBooks.

Assumptions

Your employee meets the guidelines for exemption from federal and state tax withholding.

Expected Outcome

You will not withhold federal and state taxes from the paychecks of exempt employees.

Details

You must set up each exempt employee individually. The company file cannot be set up as exempt from federal and state taxes.

To set up an employee as exempt from federal and state withholding:

Go to the employee record.

In QuickBooks: Choose Employees > Employee center.
In Simple Start: Choose Payroll at the top to enter the Payroll Center. Using the drop-down arrow, select Employees > View / Edit Employees.

Double-click the name of the employee you want to make exempt.

Click the Change tabs drop-down arrow and select Payroll and Compensation Info.

Click the Taxes button.

On the Federal tab, click the Filing Status drop-down arrow and select Don't Withhold.

Click the State tab and use the Filing Status drop-down arrow to select the appropriate option. (The option will vary by state. You may see Don't Withhold, Exempt, or a different choice. If there is no Filing Status drop-down arrow, your state is not subject to state withholding.)

Click OK > OK to save your selections.

Repeat these steps for each exempt employee.

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