Remember that state taxes, including company-paid state unemployment insurance (SUI), are important to set up correctly in QuickBooks. Even taxes paid by the employer must be included in the employee setup. In QuickBooks, all payroll taxes are calculated, accrued, and tracked on paychecks.

Not setting up these taxes will result in incorrect tax forms, and the employees not set up for a particular tax will not be listed in the appropriate state forms. QuickBooks knows an employee is subject to a certain state tax only if you use the state and its taxes in the state setup area on the employee record and complete all the required information. For example, an address or the fact that you have only one state set up in your QuickBooks file is insufficient and will result in form errors.

To create a payroll item for state taxes, simply begin using the items on an employee, and QuickBooks Payroll will guide you through setting up the tax.

 

If employees elect not to withhold income tax, they are still subject to the state tax. (They are both subject to the tax and claiming exempt from it.) In the employee setup, you must select the proper state in the state drop-down menu and then select Don't withhold from the drop-down list.

 

If your company is exempt from SUI, but you are required to file SUI quarterly forms, you should still set your employees for SUI, but enter a 0% rate for the tax on the payroll item.