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1. If this employee is a W2 employee with special tax code, please follow this guide

How to edit the tax options
https://www.halfpricesof.../employee_tax_option.asp 

2. If this employee is a 1099 contractor, please follow this guide

How to handle paychecks for both employees and contractors
https://www.halfpricesoft.com/index.asp 

Thank you.
If you have further questions, please contact us directly at services@halfpricesoft.com
Small business payroll & tax software solution
http://www.halfpricesoft.com 
How do I account for tax exempt employees? I don’t see a drop down for that?