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Intuit

New Payroll setup interview

Setting up Payroll account for the first time? We’ve made enhancements to the Payroll Setup workflow to ensure you can add employees, set up payroll, and get your first payroll done more quickly!

Important:
  • You need to have an active QuickBooks payroll subscription when you go through the setup process.
  • This article is intended for QuickBooks Desktop 2018 and later users who are activating their QuickBooks Payroll account for the first time. If you are setting up an existing Payroll account, see Payroll Setup Interview
  • Make sure your QuickBooks 2018 is updated to the latest release.
  • Do not use the setup interview if you're using Assisted Payroll service.

To access the Payroll Setup Interview, go to the Employees menu then select Payroll Setup. You’ll be directed to the Payroll setup wizard.

You can close the payroll setup at any time by selecting the X icon on the top right and you can always access it again by selecting Employees, then Payroll Setup.

The new employee setup workflow

We’ve made adding employees and getting your first payroll done a lot easier and faster! Here's how:

  1. In the Payroll setup screen, select Express setup.
  2. Enter basic employee information of your first employee then select Continue.
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    Note: If you choose to invite your employee to add their details, you can skip the next step.
  3. Go through the Add new employee wizard.
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    1. In the Compensation section, select pay item(s) then set rate and frequency (Year, Month, Paycheck) for each.
      You can add pay items in the Pay details screen or the employee profile following these steps:
      1. Finish adding the employee's information until you reach the Employee list and see the employee's name displayed there.
      2. Go to Company Setup, then select Compensation or Employee Benefits.
      3. Choose the new compensation or benefit, then select Finish.
      4. If you need to edit the item you just selected, highlight its name and select Edit.
    2. Choose pay frequency from the drop-down.
    3. Select the here link to set up employee time Off and benefits and deductions. Selecting the link will open up a new window to enter the relevant details.
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    1. Enter employee address and other information.
    2. Select Continue to go to the Payment method screen.
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    1. Select payment method (Physical check or Direct deposit).
      • If you choose Direct deposit, you’ll need to enter Deposit account information. Note: The employee paycheck can be deposited to two separate accounts. If you need to activate direct deposit after going through the payroll set up wizard, go to the Employees menu then select My Payroll service and Activate Direct Deposit.
      • If your employee does not have a bank account, select the here link at the bottom to request for a Prepaid card. Selecting the link will open a new tab in your computer’s internet browser which will allow you to request for a new prepaid card from Turbo Pay Prepaid card.
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    1. Enter employee tax details including all Federal and State/Local taxes.
    2. Select the ? icon to see explanation/details about a given field, then Done.
    3. In the confirmation window:
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      • Select Finish to be redirected to the Employee dashboard.
      • Select Add new employee to add more employees.
  4. Select Run Payroll to start your first payroll. You will be prompted to enter the Year-to-date payroll for your employees if you have run payroll for any of your employees in the current year.
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  5. If you do not have any Year-to-date information, you can select Finish this later to run your payroll now. The payroll set up will close and you will be redirected to the Payroll center. Select Pay Employees to start your first payroll.

Employee dashboard

The Dashboard lists all the employees added to date, along with their employment status. Employee status can be switched to Active or Inactive by using the toggle switch.

  • Active: Use this status to identify an employee who is currently on your payroll and actively working for your company.
  • Inactive: Use this status to identify an employee who is temporarily on leave but still employed by your company. Some examples of why an employee may take a temporary leave include military service, maternity leave, a sabbatical, or because they're a seasonal employee.

You can also mark as Inactive any employee that you've released and now no longer works for your company. However, QuickBooks doesn't use the Inactive status to define the employee as released. You must also release the employee in QuickBooks. Note: Regardless of the status, any employee who received a paycheck during the year will receive a W-2 form for that year.

Tax FAQs

In the State Subject to Withholding section, select the State drop-down list and choose the state where the employee is subject to state withholding tax. If your state has no withholding, or if this employee is not subject to withholding, it is often correct to pick the state where the employee lives. If your company has nexus or reciprocal agreements, consult your accountant for help with completing this section of the interview. See the Payroll Tax compliance article to know more about withholding by state.
In the State Subject to Unemployment Tax section, select the State drop-down and choose the state where your company is subject to state unemployment insurance tax for this employee. It is often correct to pick the state where the employee works and performs services. If your employee performs services in more than one state, consult your accountant for help with completing this section of the interview. See the Payroll Tax compliance article to know more about withholding by state.
It is almost never correct to remove a federal or state tax from an employee's record. Many employers make the mistake of removing a tax from the employee record when they should not. Doing this incorrectly causes significant "downstream" problems that affect reports, tax forms, tax calculations, and liabilities due.

There are two kinds of taxes: Company-paid and Employee-paid.

  • Every tax that is calculated and tracked in QuickBooks is set up on the employee record and is added to employee paychecks, even when it is not included in the employees' gross-to-net-pay calculation.
  • All company-paid taxes are added to paychecks, but they don't impact net pay and are not printed on pay stubs. They do, however, appear in payroll reports.
  • Taxes that are set up on an employee's record are calculated on the employee's paychecks. These taxes are added to the balance to pay for both company and employee-paid taxes. If the tax is not set up on the employee record, it is not added to the paycheck. Even if you add it to the employee record later, it is not added on paychecks that have already been created.
  • If you remove a tax from an employee, that employee will almost always be fully or partially excluded from any applicable tax forms including the 941, 940, and your state tax forms (if you use the Enhanced Payroll service).
The tax is company-paid QuickBooks knows which taxes are company-paid and which are employee-paid. All are added to the employee record based on "state lived" and "state worked," but only those that the employee pays are deducted from gross pay.
The tax rate is 0% Some employers confuse the case where the tax rate is 0% with being "not subject to" the tax. Typically, you are subject to a tax even when your rate is 0%, and you must report wages for the tax. If this is the case, you should include the tax on the employee's record, and set the rate to 0% on the Payroll Item list.
The employee claims "exempt" status Typically this means that the employee is claiming that they will not owe federal or state withholding at year end due to hardship, high deductions, or low income status. This does not mean they are not subject to the tax. "Subject to" and "exempt from" are two different but confusing concepts. For example, if you live or work in the US, you are usually subject to federal tax. However, you may claim to be exempt from withholding. In this case, you should select "Do Not Withhold" as the withholding status.
My state doesn't collect this tax In QuickBooks, all employees who live or work in the US should have a "state lived" and "state worked" selected, even when the state doesn't collect that particular tax. For Enhanced Payroll service customers, this means that employees are identified with a state and are included on the state forms. Employee mailing addresses are not used to determine an employee's locality.
The employee paid the tax while working for a previous employer this year In this case you are almost always required to withhold the tax again and the employee must file for a refund at the end of the year. You would also have to withhold tax even if the employee met the SDI and SUI limits while working for a previous employer.
I don't think I owe this tax For federal and state taxes, this is unlikely. Almost all employers owe the taxes QuickBooks suggests. Exceptions are noted in the next section.
The company has agreed to pay a tax that is usually paid by the employee This is a rare case. Even if it's correct, it's not supported by QuickBooks and your tax forms will be incorrect.
  • The employee lives or works outside of the US: It's possible that the employee is subject to withholding in their home state, but since they work in another country the SUI and/or SDI taxes are not due on that employee. Check with your state agencies to be sure.
  • The employee has a special status: For example, they're not a US citizen or are on a special visa. In this case, they are subject to some taxes and may be exempt from others. Read the rules carefully or get professional advice for this special situation.
  • The employee is working in a US protectorate such as Guam: In this case, QB doesn't support any "state-level" taxes for the employee directly. Leave the "state worked" and "state lived" blank, but set up any applicable local taxes as custom taxes, whether employee- or company-paid. QuickBooks supports both types of custom taxes.
  • The employer has a special tax-exempt status: For example, a charity, church, or government organization may have a special status at the federal or state level. If you are sure you fall into this category, then deselecting some taxes may be appropriate.

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