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Intuit

Set up payroll items for new state taxes

Overview

When your company hires employees who live or work in a state that is not set up in QuickBooks Desktop, you must set up the applicable payroll items for the new state.  Follow the instructions below to create these new payroll items.

Don't forget to contact the new state agencies to confirm you required to withhold and pay payroll taxes and to register for a tax ID number.

Details

To set up new state tax payroll items while setting up a new employee:

  1. In the employee record under Payroll Info tab, enter the employee's payroll information.
  2. Click the Taxes button, and enter the employee's federal tax information.
  3. Click the State tab, and enter the appropriate state worked and state subject to withholding.
  4. As you enter these items, QuickBooks Desktop prompts you to set up your State Tax items. Click Set Up.
  5. Follow the instructions on each screen to create the payroll item. If you have not yet applied for an account with a state agency, leave the Agency Name and Account Number fields blank, and select Yes to the message that appears.
  6. Click Finish to return to Employee Setup.
  7. Click the Other tab. This might prompt you to enter an additional state tax item. Follow the same setup steps as before.
  8. Once you are back in the Other Tab, click OK. If there are any surcharges or other taxes that QuickBooks Desktop recognizes for that state, it will ask whether this employee is subject to any of them.
  9. If the employee is subject to one or more of these taxes, click Yes. Remove any that do not apply and leave the ones that do.
  10. If the employee is not subject to any of these taxes, click No.
  11. If there are any other local or city taxes that were not automatically entered, create a User-Defined Other Tax using the instructions that follow. You can enter the tax on the Other tab of Employee Setup later.

To access the Payroll Item List:

  1. Choose Lists > Payroll Item List.
  2. Click the Payroll Item button on the bottom left and click New.

To set up payroll items for state withholding:

  1. Click Custom Setup > Next.
  2. Click State Tax > Next.
  3. Click the drop-down arrow to select your state, and then select State Withholding. Click Next.
  4. Enter the name of the payroll item, or use the name that QuickBooks Desktop automatically enters. Click Next.
  5. Enter the name of the agency this tax is paid to, and the account number. If you are still in the process of applying for an account, leave the Agency Name and Account Number fields blank.
  6. Select the correct liability account and click Next. If you left the Agency Name and Account Number fields blank, select Yes to the message that appears.
  7. This screen lets you verify the wage items used in calculating withholding. This is correct in most cases. If you are not sure, ask your accountant. Click Next.
  8. This screen lets you verify any pretax deductions that reduce wages for this tax. This is also correct in most cases. If you are not sure, ask your accountant. Click Finish.

To set up payroll items for state unemployment:

  1. Click Custom Setup > Next.
  2. Click State Tax > Next.
  3. Click the drop-down arrow to select your state, and then select State Unemployment. Click Next.
  4. Enter the name of the payroll item, or use the name that QuickBooks Desktop automatically enters. Click Next.
  5. Enter the name of the agency this tax is paid to, and the account number. If you are still in the process of applying for an account, leave the Agency Name and Account Number fields blank.
  6. Select the correct liability and expense accounts, and click Next. If you left the Agency Name and Account Number fields blank, select Yes to the message that appears.
  7. If you have an account, enter the correct tax rate. If you do not, leave these fields as they are. It is likely that the rate shown is your rate, because QuickBooks Desktop defaults to the New Employer rates. Click Next.
  8. This screen lets you verify wage items used in calculating unemployment. This is correct in most cases. If you are not sure, ask your accountant. Click Next.
  9. This screen lets you verify any pretax deductions that reduce wages for this tax. This is also correct in most cases. If you are not sure, ask your accountant.
  10. Click Finish.

Note: Setting up a payroll item with a tax tracking type of Other can potentially cause problems with W-2 reporting, so be sure to check with your accountant before choosing this solution.

To set up payroll items for other taxes:

  1. Click Custom Setup > Next.
  2. Click State Tax > Next.
  3. Click the drop-down arrow to select your state, and then select Other Taxes. Click Next.
  4. Click the drop-down arrow and select the tax you want to set up, if it is listed. Click Next.
  5. If it is not there, select User-Defined Tax. Select whether the tax is paid by the company or the employee, and click Next.
  6. Enter the name of the payroll item, or use the name that QuickBooks Desktop automatically enters. Click Next.
  7. Enter the name of the agency this tax is paid to, and the account number. If you are still in the process of applying for an account, leave the Agency Name and Account Number fields blank.
  8. Select the correct liability and expense accounts. Click Next.
  9. Click the Tax Tracking Type drop-down arrow. Each tax-tracking type displays a description below it when selected. Select the one you want to use. If you are not sure, ask your accountant. Click Next.
  10. Select whether the tax is calculated based on quantity, hours, or neither. Click Next.
  11. Enter the default rate and/or limit, if there is one. This rate and limit are used for each employee. Click Next.
  12. This screen lets you verify the wage items used in calculating the tax. This is correct in most cases. If you are not sure, ask your accountant. Click Next.
  13. This screen lets you verify any pretax deductions that reduce wages for this tax. This is also correct in most cases. If you are not sure, ask your accountant.
  14. Click Finish.

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