QuickBooks Desktop defines an employee as someone you give a W-2 form at the end of the year. You pay employees with paychecks and withhold taxes for them. Set up, add or enter a new employee in QuickBooks Desktop.
Have your employees complete each of the following forms:
- State W-4 (if applicable)
- Direct deposit authorization (if applicable)
See Payroll 101 for more information in hiring your first employee.
Assisted Payroll: You cannot set up employees in Indiana or in Wyoming because QuickBooks Desktop Payroll Assisted service is not available in those states.
Six areas to complete in adding an employee
When creating a new employee or editing an existing one, you can enter payroll information in any one of six areas.
Enter the employee's name and Social Security Number. The other fields are optional.
Address & Contact
Enter the employee's home address, email address, and phone numbers.
Enter all payroll info associated with the employee, such as earnings items, taxes, sick and vacation time, pay frequency and payroll schedule, and direct deposit information, if applicable.
Types of employee compensations:
- Regular earnings for an hourly employee is defined as the employee's hourly rate multiplied by the number of hours worked during the payroll period.
- Salaried employees receive a fixed amount for each payroll period, whether weekly, bi-weekly, semi- monthly, or monthly.
- The payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. Payments often will be calculated on the basis of a percentage of the goods sold. This is a way for firms to solve the principal agent problem, by attempting to realign employees' interests with those of the firm.
- Bonus/tip refers to extra pay due to good performance or money or an equivalent given in addition to an employee's usual compensation.
Enter the employee's hire date, release date (when applicable), and employment type.
You will also see the following tabs:
- Leave of Absence: Enter the employee's leave details when applicable.
- Termination: If an employee gets terminated, enter the termination dates and details.
If a release date is entered, you must remove it before you can pay the employee.
Workers Compensation (QuickBooks Desktop Payroll Assisted and Enhanced Payroll only)
In addition, you can designate the employee as inactive by selecting or clearing the Employee is inactive box.
Add a new employee:
Note: If you file Form 1120 or 1120S, the IRS requires that you report compensation for company officers separately from employee wages. 1120 (U.S. Corporation Income Tax Return) is not currently available for use within QuickBooks Desktop. Please visit the IRS web site for additional information, form availability and instructions.
Open the New Employee window:
From the menus at the top, select Employees and choose Employee Center.
At the upper left of the Employee Center, select New Employee.
Go to Personal tab. Complete the fields in the tab.
Select the Address & Contact tab and complete the fields in the tab.
Select the Additional Info tab, and enter any information you want to store for the employee.
- Enter information needed in CUSTOM FIELDS, and/or select Define Fields to add custom fields to track employee information, such as birthday or spouse's name.
Select the Payroll Info tab. Enter applicable information regarding compensation and benefits.
- In the Earnings section, select the Item Name dropdown arrow.
- Select or add an item, and enter the Hourly/Annual Rate.
- In the Additions, Deductions and Company Contributions section, select the Item Name dropdown arrow.
- Example: medical, 401 (k), wage garnishment, etc.
- Select or add an item, and enter the Amount and Limit for every item selected or added.
- Select the Payroll Schedule dropdown button, and select or add a new schedule.
- Select the Pay Frequency dropdown button, and select frequency.
- Select the Class dropdown button, and select or add a new class.
Select Taxes button to set up Federal, State and Other taxes.
- Got a VISA employee? If you have an employee on a VISA click to remove the taxes they are not subject to. Not sure which taxes to select? Contact your accountant or tax professional and check out our helpful list of IRS articles. If you have QuickBooks Desktop Payroll Assisted, you must contact us to remove taxes paid by the payroll service.
Be sure you select the State Worked and State Subject to Withholding tax code, even if there are no state income taxes (states without state income taxes include TX, FL, SD, WA, TN, NH, AK and NV). This ensures that Intuit files properly for this employee and your company.
Review the screens carefully and look for new options that may appear when choosing a State Worked and State Subject to Withholding tax code. You may have additional fields to complete.
When you set up an employee in a new state, you are prompted to set up the state taxes if the information is not already entered. If you do not enter a state ID for a tax item, QuickBooks Desktop will display the following message:
Does either of the following apply to your company
- I am in the process of applying for my state tax ID.
- My company is exempt from this tax.If you have your state tax ID, select No and enter the ID number. If you are in the process of applying for the state tax ID number, select Yes to continue.If your employee lives and works in different states (or your company is in a different state than where your employee lives or works) your State Worked and State Subject to Withholding tax codes could depend on reciprocal agreements. See Multi-State withholding responsibilities and QuickBooks Desktop Payroll: Multi-State Employer Unemployment Insurance Requirements for more information.
- Select OK.
- Select Sick/Vacation button, and setup the sick and vacation information.
- Select OK.
- Select Direct Deposit button, and enter the employee's direct deposit bank account information. See also Direct Deposit requirements, signup, and activation.
- Enter your direct deposit PIN when prompted.
- Select OK.
Select the Employment Info tab.
- Select Hire Date.
- Select Release Date for terminated employees.
- In the Employment Details section, select from the Type dropdown list.
- Select OK to save.
Want to set up employee defaults?
You can set up employee defaults in QuickBooks Desktop for items such as Earnings, Additions, Deductions, Company Contributions, Taxes and Sick/Vacation. Each time a new employee is added, the employee default setup will appear on the employee profile.
Select Edit and choose Preferences.
Select Payroll & Employees.
Select the Company Preferences tab.
Select the Employee Defaults button.
Add or make changes to the Employee default profile.
- Select OK twice to save your changes.