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M
marcjp
January 18, 2024
Question

Setup and Management of SEP-IRA for an LLC in QBO

  • January 18, 2024
  • 1 reply
  • 0 views

18 January 2024

 

Good morning all, and thanks in advance for your contributions and guidance.

 

As a Sole Member LLC setting up and self-managing SEP-IRA contributions in QuickBooks Online, a few questions on the basics for the community:

  • Can you confirm that currently (as of January 2024) there is no seeded/predefined account in the CoA for SEP-IRA contributions, and that one must be manually created?
  • Can SEP-IRA contributions be included (obviously as a non-taxed line item) within a regular payroll run, or must the contributions be generated separately as a check issuance?
    • My understanding of the SEP-IRA contribution transaction itself is that it must first be received by the Employee via a personal (banking) account and then deposited into the destination SEP-IRA investment account, rather than a direct deposit from the QBO business account into the SEP-IRA. Correct?

 

Thanks & regards...

1 reply

J
jeanbiverly_
January 18, 2024

It's great to see you here in the Community, @marcjp! I'm here to clear up any concerns you have about SEP-IRA contributions in QuickBooks Online (QBO).

 

Currently, there's no predefined account in QBO's Chart of Accounts for SEP-IRA contributions. You can create it manually. To do so, you can create the account under the Chart of Accounts and then make an expense transaction for the contribution. Here's how:

 

  1. Go to the Accounting menu.
  2. Click the New button under the Chart of the Accounts tab.
  3. Select Other Current Liabilities as the Account Type.
  4. Choose Other Current Liabilities as the Detail Type.
  5. Enter the Specific Name and Description for the account.
  6. Hit Save and Close to confirm.
  7. Navigate to the + New menu.
  8. Choose Expense, then select to whom you'd like to send the contribution (payments).
  9. Under Account Details, locate the account you've created.
  10. Enter the rest of the expense details, then Save and close.

 

You can include SEP-IRA contributions in a regular payroll run in QBO. Add the contributions as a non-taxed line item within the payroll run. Ensuring the contributions are accurately recorded and reported in compliance with the IRS regulations and guidelines is essential. We recommend consulting with a professional accountant or tax advisor to ensure the SEP-IRA contributions are correctly recorded and reported in QBO. 

 

Use the SEP-IRA contribution account you created if you prefer to keep the contributions separate from payroll. If you want to include it in payroll, set up a retirement plan and defer the tax to avoid taxation.

 

Regarding your follow-up question, the employer typically makes SEP-IRA contributions directly into the SEP-IRA accounts of eligible employees. The employees can only receive the contributions in their personal bank accounts after depositing them into the SEP-IRA accounts. The employer makes the contributions on behalf of the employees and isn't considered part of the employee's taxable income. Ensuring the contributions are accurately recorded and reported in compliance with the IRS regulations and guidelines is essential.

 

Check out this article for guidance on wrapping up this year's payroll and preparing for the next: Year-end checklist for QuickBooks Online Payroll.

 

Please let us know if you have additional concerns regarding the SEP-IRA contributions. We've got your back. Stay safe!

    M
    marcjpAuthor
    January 19, 2024

    18 January 2024

     

    Hi Jean,

     

    Many thanks for the courtesy of your reply, informed responses to my questions, and step-wise tutorials.

     

    By way of a quick follow-up to your guidance - regarding both after-tax and SEP-IRA contributions made within a single payroll run:

    * I don't know of a way to split routing of the destination accounts by line-items i.e. direct deposit of after-tax net payroll into one (banking institution) account, whilst depositing the SEP-IRA contribution into another (investment brokerage institution) account. Is there a solution for this, or does this scenario require two separate transactions?

     

    Thanks & best regards,

    Marc

    A
    AbegailS_
    January 19, 2024

    Thanks for getting back to us. I'm here to answer your follow up queries, @marcjp. 

     

    In response to your question about dividing the destination accounts for direct deposit and SEP-IRA contributions, it's important to note that a SEP-IRA is a personal retirement plan and isn't directly associated with the LLC's business expenses. As a result, there isn't a pre-established account for SEP-IRA contributions in the business context.

     

    As the previous agent suggested, you'll need to manually create two separate transactions to handle the direct deposit of after-tax net payroll into one banking institution account and the deposit of the SEP-IRA contribution into another investment brokerage institution account.

     

    To track the contribution without affecting your profit and loss, we recommend recording a transfer from your business checking account to the account you've created for the SEP-IRA contribution. This approach will allow you to accurately track the contribution while keeping it separate from your business expenses.

     

    For more detailed steps on how to transfer funds, you can check out this article: Transfer funds between accounts

     

    Additionally, here's an article that may guide you in paying your payroll taxes to avoid penalties due to late payments: Pay and file payroll taxes and forms in Online Payroll.

     

    Fill me in if you have more questions about managing your SEP-IRA plans in QBO. I'd be glad to help you some more. Take care and stay safe.

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