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Set up tax exempt employees

Learn how to set up tax exempt employees in QuickBooks Desktop Payroll.

Follow the steps below to set up a tax exempt employee in QuickBooks Desktop Payroll.

Note: You must set up each exempt employee individually. You can't set up the company file as exempt from Federal and State taxes.

  1. Go to the Employees menu, then select Employee Center.
  2. Double-click the name of the employee.
  3. Go to the Payroll Info tab.
  4. Select Taxes....
  5. Go to the Federal tab. From the Filing Status drop-down, choose Don't Withhold.
  6. Go to the State tab. From the Filing Status drop-down, choose the appropriate option. (The option will vary by state. You may see Don't Withhold, Exempt, or a different choice. If there's no Filing Status drop-down, your state is not subject to state withholding.)
  7. Select OK twice to save your selections.
  8. Repeat these steps for each exempt employee.