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pnwtax
January 9, 2024
Question

Guideline Roth 401k showing as deduction from Gross Pay on Payroll Summary Report

  • January 9, 2024
  • 1 reply
  • 0 views

We are starting 2024 with a Roth 401k from Guideline. All the deductions were automatically set up by them which was great. I just processed the first payroll of the year with these deductions and I noticed the Employee Roth 401k deductions shows up on the Payroll Summary as "Deductions from Gross Pay". I doubled checked each pay stub, and on each stub the Roth 401k deductions was under "Adjustments from Net Pay". So Why would this employee contributions be classified as two different things on the stub and payroll summary?? The Company Match looks to be fine and in the correct spot.

1 reply

Nicole_N
Nicole_N
January 10, 2024

Let me share some insights about why the Roth 401k employee contributions are classified as two different things in QuickBooks Desktop (QBDT), @pnwtax.

 

This occurrence is due to the way the payroll system is configured. Unlike a tax-deferred 401(k), contributions to a Roth 401(k) do not reduce your taxable income now when they are subtracted from your paycheck. Contributions to a Roth 401(k) are after-tax contributions.
 

That said, Roth 401(k) must be set up as contributions and not a deduction. Learn more about setting up a company contribution by visiting this link: Set up or change a retirement plan.  This will provide you tips on how to combine deductions limits for Roth 401K as well as setting up other retirement deductions plans in QuickBooks Desktop.

 

It's important to review the payroll system's configuration and settings to ensure that the classification of employee contributions is consistent across both the payroll summary report and the employee paystubs.

 

In addition, you can read some of these articles to understand more about the Guideline 401k plan and how gross and net pay differ: 

 


Let me know in the comments below if you have follow-up questions about paying payroll liabilities. I'll be around to provide the necessary help.

G
GBOYD
January 9, 2025

In the post from 1/9/24, you say to set up the Roth 401(k) as a contribution not a deduction. 

 

This is not an option when using Custom Setup. See below. The Roth is not a Company Contribution. It's an Employee Contribution.

Would you be able to clarify what you mean?

 

Also, on the QB Employee payroll summary, the Roth amount is under Deductions from Gross Pay, not Deductions from Net Pay as would be expected.

The Default Tax settings do not seem to be deducting the Roth correctly. Roth amounts should not be deducted from Gross wages, correct? They should be deducted from Net.

 

 Thank you

 

 

 

C
CamelleT
January 9, 2025

Yes, I can definitely clarify the details about Roth 401(k) in QuickBooks Desktop (QBDT) Payroll, GBOYD.  
 

QuickBooks Desktop Payroll provides a comprehensive solution for managing various retirement plans, including Roth 401(k)s. This feature allows employers to efficiently handle employee contributions and ensure compliance with relevant tax regulations.
 

When an employee chooses to contribute a portion of their salary to their 401(k) plan, this is set up as a payroll deduction in QBDT. However, if the company/employer contributes to an employee's 401(k) plan, these are recorded as company contributions.
 

Additionally, it's important to note that Roth amounts are typically deducted from Gross Pay, as they are calculated before taxes are applied. If the Roth 401(k) deductions appear under Adjustments from Net Pay, it could indicate that there have been corrections or additional contributions made after the payroll has been processed.

 

Finally, I'll share this article to assist you in effectively managing your employee-paid payroll deductions: Set up, change, or delete employee-paid payroll deductions.

If you have other questions about handling payroll items in QBDT, comment below. We are always here to provide answers to your queries. 

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