Set Up Employees during QuickBooks 2012 Basic Payroll Setup - dummies

Set Up Employees during QuickBooks 2012 Basic Payroll Setup

By Stephen L. Nelson

After you set up your company information for payroll in QuickBooks 2012, you’re ready to set up employees for payroll. As part of the Basic Payroll setup, QuickBooks displays a web page where you may add your employees.

You may also add employees by displaying the Employees Center. (Choose the Employees→Employee Center command and click the New Employee button.) When you choose the New Employee button, QuickBooks displays the New Employee dialog box.


To describe an employee, you complete the fields supplied on the Personal tab. All this stuff is self-explanatory; you enter the person’s first name into the First Name box, the person’s middle initial goes into the M.I. box, and so forth.

If you want to collect and store additional information for an employee (such as his bank account number for direct deposit), you click the Additional Info tab. This tab provides a Define Field button that you can use to collect custom bits of information about an employee.

To use the Custom Field option, click the Define Field button and then use the Define Field dialog box to define the fields that you want to add.

Payroll and tax information for employees in QuickBooks 2012

Use the Payroll Info tab to describe how an employee’s salary or wages are calculated. You enter the payroll item into the Earnings area.


For example, if an employee earns an annual salary of $30,000, you enter the salary payroll item into the Item Name column. Then you enter the annual salary of $30,000 into the Hourly/Annual Rate column. Use the Pay Frequency drop-down list to identify the pay period. Optionally, use the Class drop-down list to classify payments to this employee.

To describe which taxes an employee pays, click the Taxes button. QuickBooks displays the Taxes dialog box.


Use the Federal tab to identify the employee’s filing status, number of allowances claimed, and any extra withholding specified. In addition, use the Subject To check boxes to indicate whether this employee is subject to Medicare, Social Security, or federal unemployment tax, or if the employee is eligible for an earned income credit.

Note that not all employees are subject to Medicare and Social Security taxes. Consult your tax advisor for more information.

The State tab supplies boxes that you can use to describe state taxes, obviously.

The Other tab lets you describe and store any local tax information, such as a city income tax. Again, what you see on the Other tab depends on your locality.

If you click the Sick/Vacation button, you see the Sick and Vacation dialog box. This dialog box lets you specify how sick or vacation pay or personal leave time is accrued payroll period by payroll period.


You can specify the number of sick or vacation leave hours at the time you’re setting up payroll in the Hours Available As Of text box. You can use the Accrual Period drop-down list to specify how often sick or vacation pay should be accrued.

If sick or vacation pay is accrued, use the Hour Accrued Per box to identify how many hours of sick or vacation time an employee earns each paycheck, hour, or at the beginning of the year.

If you have set a maximum number of sick hours or vacation hours that an employee can accumulate, enter this value into the Maximum Number of Hours box. If you want to reset the sick hours and vacation hours to zero at the beginning of each year, select the Reset Hours Each New Year? check box.

The Vacation area of the Sick and Vacation dialog box works the same way as the Sick area. For example, enter the number of vacation hours available in the Hours Available As Of box. Use the Accrual Period drop-down list to specify how often employees earn vacation time.

Use the Hours Accrued Per Paycheck and the Maximum Number of Hours boxes to control how vacation time accrual calculations work. Finally, select the Reset Hours Each New Year? check box to zero out vacation time at the beginning of each new year.

If you’ve chosen to use the Direct Deposit option, click the Direct Deposit button on the Payroll Info tab. QuickBooks then prompts you to supply the direct deposit information necessary to directly deposit checks for employees.

Other employment-related information in QuickBooks 2012

If you select the Employment Info option from the Change Tabs drop-down list, QuickBooks displays the Employment tab. The Employment tab lets you store the hire date, fire date, and other similar bits of employment data.