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Gma Sonshine
November 18, 2022
Question

403(b) pre-tax payroll

  • November 18, 2022
  • 2 replies
  • 0 views

I spent an hour this morning with desktop assisted payroll trying to get QB to set-up our 403(b) payroll item.  QB won't allow me to remove the Federal or State taxes.  QB said that you have to the taxes out.  No you don't as this is not a Roth 403(b).  I even showed them the IRS information (see below).  They continued to tell me to talk my accountant to make sure that was right?  Huh?  The IRS says it is.  QB has no work around for this.  I tried to run a paycheck and $0 out the taxes and QB wouldn't let me do this either.  Any suggestions??

 

Choose a 403(b) Plan

A 403(b) plan (tax-sheltered annuity plan or TSA) is a retirement plan offered by public schools and certain charities. It's similar to a 401(k) plan maintained by a for-profit entity. Just as with a 401(k) plan, a 403(b) plan lets employees defer some of their salary into individual accounts. The deferred salary is generally not subject to federal or state income tax until it's distributed. However, a 403(b) plan may also offer designated Roth accounts.  Salary contributed to a Roth account taxed currently but is tax-free (including earnings) when distributed.

    2 replies

    BigRedConsulting
    BigRedConsulting
    November 18, 2022

    Roth 403(b) plans, like other Roth plans are after-tax, meaning there is no tax reduction at the time you create the paycheck for the employee.

     

    The Roth plans are opposite of the standard non-Roth plans:

    Standard plans: The money put into the plans sheltered from income tax and then is taxable when withdrawn  later during retirement.

    Roth plans:The money put into the plan is fully taxed and then is not taxed when withdrawn later during retirement.

     

    This is reflected in your quote from the IRS: "Salary contributed to a Roth account taxed currently [on the paycheck] but is tax-free (including earnings) [on the original contributions] when distributed [during retirement]."

    G
    Gma SonshineAuthor
    November 21, 2022

    1. NOT a Roth, so that information doesn't help me.  

     

    I appreciation the desire to help me, but it sounds like there is NOT a solution for my problem, but to move my client to another payroll service.  Actually, I will move all my clients.   

    BigRedConsulting
    BigRedConsulting
    November 21, 2022

    @Gma Sonshine 

    RE: I appreciation the desire to help me, but it sounds like there is NOT a solution for my problem,

     

    I think we may have lost track of the problem in this thread. At least, I can't see one.

     

    What specifically do you see as the problem? What are you trying to do that you can't do?

    R
    RCV
    November 18, 2022

    Thanks for taking the time to scour our Community space for potential solutions, Gma Sonshine.

     

    We appreciate you contacting our Assisted Payroll Support Team to get this sorted out. The supported retirement plans for 403 in QuickBooks Desktop are the following:

     

    • 403(b) /403(b) catch-up
    • After-tax Roth 403(b)

     

    To learn more about retirement plans, check out these articles:

     

     

    On the other hand, the option to remove the Federal or State taxes in QuickBooks Desktop is unavailable. With this said, I'd recommend sending this request straight to our product engineers through feedback. Sharing features and options that you would like implemented is how our engineers look for new product updates. Here's how:

     

    1. Go to the Help menu.
    2. Select Send Feedback Online, then choose Product Suggestion.
    3. Enter your request.
    4. Once done, click Send Feedback.

     

    We also encourage you to consult your tax advisor on how to properly handle this one in QuickBooks Desktop. If you need to see QuickBooks tracks employees' deductions, you can payroll reports. To learn more about it, please check here: Customize payroll and employee reports.

     

    Let me know if you have other payroll concerns. Just leave a comment below and I'll get back to you.

    BigRedConsulting
    BigRedConsulting
    November 18, 2022

    @RCV  RE: On the other hand, the option to remove the Federal or State taxes in QuickBooks Desktop is unavailable.

     

    Well, it is actually available except if someone is using Assisted payroll, and then it's not.

     

    But in any case, there is no reason to change the taxability of this payroll item as the defaults are correct, which you should know - being a QuickBooks payroll expert that you must be to be here answering questions.

     

    That is why the Assisted payroll customer can't change the taxability. Which you should know. And it is why the non-Assisted payroll customer will get big ugly warning when they change the taxability. Which you should know.

     

    There is no reason to send the customer off to put in a suggestion for something that is currently working correctly. Which you could have pointed out to the customer instead of insinuating there might be something wrong.

    G
    Gma SonshineAuthor
    November 18, 2022

    The defaults are not correct.  As a 403(b) for a non-profit organization is non-taxable.  And yes, I'm using Assisted payroll.  Which I really don't understand why there isn't a work-around when this is a legitimate request.  Even legal...

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