Setting up employee payroll tax information

Show expandable text

We moved!

Help articles have been migrated to the new Help and Support. You can find help for your products and accounts, discover FAQs, explore training, and contact us!

Payroll tax information is added to the employee on the Payroll Taxes tab of the Employees screen. Although the federal and state taxes are added to the employee automatically based on the address information for both employee and client (making it essential to use the Address verification feature when setting up your client and employee address information), you must specify the employee's federal and state withholding information here. Also, using the Wage Exempt checkboxes in the Taxes section, you can mark employees as exempt for individual taxes.

To set up payroll tax information for an employee, follow these steps.

  1. Choose Setup > Employees and click the Payroll Taxes tab.
  2. In the Federal withholding section: For employees being added or updated after January, 2020, mark the Use 2020 (or newer) W-4 checkbox and follow the remaining steps in this section. For employees added in 2019 or before, do not mark the checkbox, but rather click the 2019 (or prior) W-4 button to view or modify the existing federal withholding information there.
  3. Specify the filing status for the employee and make any changes to the other fields in this section as needed.
  4. To withhold any additional amounts for this employee, make a selection from the drop-down list (Additional Amount, Additional Percentage, Fixed Amount, or Fixed Percentage) and then enter the appropriate amount or percentage.
  5. Mark any checkboxes that are appropriate for this employee. If the employee is a nonresident alien, mark the Nonresident alien checkbox, and if the employee is tax exempt, mark the Tax exempt checkbox.
  6. If the employee is eligible for earned income credit, select their EIC status from the drop-down list and, if applicable, mark the Spouse has form W-5 in effect checkbox.
  7. In the Other Federal Settings section, mark the Full FUTA rate checkbox only if the full FUTA rate of 6.0 percent should be used for this employee instead of the standard 0.6 percent.
  8. If the employee qualifies for the new hire FICA credit (from the HIRE act), mark the New hire FICA credit checkbox.


    • When this checkbox is marked for an employee, the employer FICA SS tax amount will be 0.00 for payroll checks processed for that employee with pay dates from April 2010 through December 2010.
    • This checkbox is not available for employees specified as household employees in the Main tab of the Employees screen.
    • The hire date for the employee must be between February 4, 2010, and December 31, 2010, for the employee to qualify. The hire date must be entered in the Hire date field in the Personal tab of the Employees screen.
    • Employees specified as Family of owner in the Personal tab of the Employees screen are not eligible for the credit.
  9. In the State withholding section, enter state withholding information. Other than the State field, the fields in this section vary by state, because they are based on the fields for each state's W-4 form.

    Note: When you update the state withholding information for an employee and then save the employee record, the information in this section may revert to displaying information for a different state. This has no bearing on the calculations that the application will perform on the payroll checks; the information you entered is saved.

  10. In the Unemployment section, take note of which state or states are listed (if the employee works in multiple states).
    • If a single state is listed when there should be multiple unemployment states, or vice versa, then you may need to mark or unmark the Do not combine state unemployment checkbox on the Payroll Taxes tab of the Clients screen.
    • If the wrong state is listed as the unemployment state, make sure that the correct work location is marked as the primary location for this employee in the Main tab of the Employees screen.
  11. In the Taxes section, you have the options to override the application's multi-state withholding calculations and to adjust the employee's taxable wages if necessary.
  12. In the Taxes grid, all the applicable federal and state taxes are listed automatically based on the address information for both employee and client, but you can modify GL liability and expense account numbers for the tax item. To modify the GL liability and expense accounts for a tax item for each of the employee's active location/department combinations, click the Ellipsis button to open the Employee Tax Item Settings dialog. This will gray out the the GL account information fields in the Taxes grid. In addition, you can mark the employee as exempt for individual taxes.


    • Because the application determines taxability for employees based on address information for the employee and the client, it is essential that you use the Address verification feature when entering address information into the application.
    • For information about options for setting up employees for multi-state withholding, see Setting up multi-state employees - examples.

Was this article helpful?

Thank you for the feedback!