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jim77144
November 20, 2024
Question

What is the proper method for recording 401k payments that include both employer and employee contributions

  • November 20, 2024
  • 1 reply
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I have QBO payroll that we enter the 401k employee contributions and the employer contributions in to. My payment comes from my checking through bill pay for a lump sum. What is the proper method and acct type to record this properly? Currently, it is all listed under Payroll liability/401k, but shouldn't this be just the employee contribution? I believe there should be a split transaction where I have a payroll expense for the employer contribution and liability for the employer contribution. Please advise what the best method is for completing these weekly transactions. 

 

Additionally, I have one employee who took out a loan against their 401k. Do I need to record their principal and interest payments against their 401k loan and separate them from everyone else?

1 reply

T
Teri11_2
January 14, 2025

I usually setup 3 liability accounts and one expense account:

23x1 401k Liability EE

23x2 401k Liability ER 

23x3 401k Liability Loan EE

63x0 401k Expense ER 

 

Assuming you are already accruing labor expense for payroll liability, in addition to that,

(similar to accruing payroll taxes ER).

 

Accrue expense each payperiod:

DR 63xx

CR 23x2

 

Then clear all liabilities when paid:

DR 23xx

CR 1000 Cash

 

401k Loan amortization is done by 401k Admin. You just need to record payments made that are deducted from paychecks. I don't use QB payroll so can't help much on the mechanics, but this is accounting to do.

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