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R
R K
December 29, 2023
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How does QBO payroll calculate Simple IRA contributions when M,D,V pretax $ are involved?

  • December 29, 2023
  • 1 reply
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How is the IRA contribution max calculated when an employee has M,D,V - family coverage in which the 2024 annual premium deduction will be in the $8,000 range.   This employee does not contribute to a HSA Plan at this time. 

 

The IRA is "tax deferred" on FIT and SIT withholding only.  The IRA ee contribution max for 2024 is $16,000.  

I know QBO can calculate the IRA correctly as it appears on the Quarterly Reports and W2 from previous years.

 

Thank you, R.K.

 

 

 

Best answer by JanbonN

Hello there, @R K. Appreciate the details you've provided. Let me share some information about your Simple IRA.

 

Based on your details, the employee's MDV annual deduction is $6,812.00, and the 2023 yearly max for Pre-tax deductions is $8,300 for family coverage. To calculate the maximum IRA contribution, you need to find the difference between the IRS pre-tax limit and the MDV deduction. In this case, the maximum IRA contribution would be $1,488.00. However, the employee's contribution is limited to the difference between their MDV deduction and gross salary. Based on the screenshot, it will be $83.05 per pay period.

 

 

Also, contributions to Traditional IRAs are considered in the pre-tax max. IRA contributions are taken into account, along with other pre-tax deductions.

 

Moreover, I recommend consulting your accountant for further guidance.

 

Additionally, you can check this article for helpful information on wrapping up this year's payroll: Year-end checklist for QuickBooks Online Payroll.

 

Let me know if you need further clarification about your Simple IRA in QBO. I'll be here to provide assistance. Have a great day ahead.

1 reply

S
ShyMae
December 29, 2023

Hi there, RK. I hope everything is well. I'm here to provide information on how QuickBooks calculates contributions.

 

In QBO Payroll, when calculating Simple IRA contributions with MDV pretax, the system considers the employee's gross pay before any other pretax deductions. The IRA contribution max is calculated based on the employee's annual compensation. You're right that for 2024, the maximum employee contribution to a Simple IRA is $16,000.

 

Therefore, the employee's family coverage and the yearly premium deduction would directly affect the calculation of the IRA max contribution.

 

Please know that QuickBooks automatically tracks employee contribution limits in the year 2024. For additional information, check out this article: Employee contribution limits. 

 

I'll be adding these articles to help you manage your payroll:

 

 

Click the reply button below if you need further clarification concerning IRA contributions. I'm still here, ready to assist you further. Best wishes, RK. 

R
R KAuthor
January 2, 2024

Happy 2024 but it still feels like 2023!

 

Thank you for your response, but I'm still confused.  My objective is to give employees with dependent MDV an opportunity to save for their retirement via the offered Simple IRA.  For example:

#1.  The EE Gross salary for the year is $60,000 = $1,923.08 a pay period.  The weekly Gross = after the dependent MDV deduction of $262.00.  Her new gross after MDV deduction = $1,661.08 or $43,188.08 per yr.  She also elected to have 5% of her salary go to her Simple IRA account.   Is her 5% calculated on the $1,661.08 which equals gross annual salary of $43,188.08 *5% = $2,159.40 or $83.05 per pay period.

#2.  If I'm understanding you correctly.  QBO would calculate the 5% on the $60,000 = $3,000 per year or $115.38 per pay period.  Her MDV annual deduction= $6,812.00.  The 2023 annual max for Pretax deductions = $8,300 for family.  The max she would be allowed to contribution is the difference between the IRS pretax limit $8,300 less $6,812.00 =$1,488.00.  She could only contribute $1,488.00 to her IRA for the year despite the limit being $16,000. 

 

Since the IRA contributions are tax deferred subject to FICA taxes are the IRA contributions considered in the Pretax max?  Please verify which is the correct way to calculate the IRA contributions and if it is subject to the "Pretax" max as outlined by the IRS.  The employee would like to contribute more to her IRA but is limited to the fact that she has children doesn't make a lot of sense to me.

 

Thank you for your time.  RK 

 

 

 

   

J
JanbonNAnswer
January 2, 2024

Hello there, @R K. Appreciate the details you've provided. Let me share some information about your Simple IRA.

 

Based on your details, the employee's MDV annual deduction is $6,812.00, and the 2023 yearly max for Pre-tax deductions is $8,300 for family coverage. To calculate the maximum IRA contribution, you need to find the difference between the IRS pre-tax limit and the MDV deduction. In this case, the maximum IRA contribution would be $1,488.00. However, the employee's contribution is limited to the difference between their MDV deduction and gross salary. Based on the screenshot, it will be $83.05 per pay period.

 

 

Also, contributions to Traditional IRAs are considered in the pre-tax max. IRA contributions are taken into account, along with other pre-tax deductions.

 

Moreover, I recommend consulting your accountant for further guidance.

 

Additionally, you can check this article for helpful information on wrapping up this year's payroll: Year-end checklist for QuickBooks Online Payroll.

 

Let me know if you need further clarification about your Simple IRA in QBO. I'll be here to provide assistance. Have a great day ahead.

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