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    Set up employees as exempt from federal and state tax withholding

    Article ID: 1000104


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

    Expected Outcome

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


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


    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:

    In QuickBooks Desktop, choose Employees > Employee Center to go to the employee record.

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

    Click the Payroll Info tab.

    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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