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dcarlsondds-gmai
May 27, 2022
Question

Why doesn't quickbooks calculate After Tax Roth 401k employee contributions? I have to manually subtract taxes from gross pay & multiply by the % the employee withholds

  • May 27, 2022
  • 2 replies
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2 replies

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RoseJillB
May 27, 2022

Thank you for posting here in the Community, @dcarlsondds-gmai.

 

I’ll share some insights about the 401(k) retirement plans in QuickBooks Online (QBO).

 

A Roth 401(k) is a form of retirement savings account. If a portion of the participant's elective deferrals is designated as a Roth contribution, the defined contribution is taxed immediately and placed in a Roth 401(k) account.

 

The account's earnings accumulate tax-free. The money is distributed tax-free when it is distributed as part of a qualifying distribution. As a result, if the gains on a Roth 401(k) account are distributed as part of a qualifying distribution, they are never taxed.

 

Because Roth contributions are made after taxes, the employee does not have to pay taxes on the money withdrawn at retirement. On the other hand, after-tax signifies that this deduction item is subject to taxes based on gross pay.

You can check out this article for further information about 401(k) retirement plans: Add or change pay types.

 

Feel free to add a reply in this thread if you have further concerns with payroll. Stay safe!

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dcarlsondds-gmaiAuthor
May 29, 2022

That doesn’t answer my question. For example, when QuickBooks takes out an employees elective deferral for their 401k, it does it correct. It takes 4% from the gross pay. However with a different employee who has an elective deferral for their Roth 401k, QuickBooks also takes 4% from the gross. So the amounts are the same for both employees. Does this example make sense? QuickBooks isn’t taking out the taxes for the Roth 401k employee

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    cathy86
    October 6, 2022

    I am having this issue as well.  QB is calculating Roth 401K contributions on gross pay rather than net.  When setting up the payroll item, I did not change any of the default settings in QB.  We've had one payroll cycle now that has a couple of employees with incorrect contributions

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      AileneA
      October 6, 2022

      Hello, cathy86. 

       

      I'll take it from here and clarify the reason why the Roth 401(k) shows up under Deductions from gross pay. 

       

      To clarify, the Gross vs Net page on the payroll item setup screen points to how QuickBooks would deduct the amount from the paycheck. 

       

      Its possible that you've selected Gross, the calculated amount (or percentage) is deducted from the employee's gross pay. This is the reason why the Roth 401(k) item shows up under "Deductions from gross pay". 

       

      And if you need to have the amount deducted from the net pay, then we'll want to switch to Net for Gross vs Net on the Roth 401(k)'s payroll item setup page. 

       

      If you need some reference on setting up Roth-related plans, we can take a look at this article: Set up Roth 401(k) and Roth 403(b), and Roth 457(b) plans. 

       

      Also, here's the link for the detailed steps on how to run payroll-related reports: Run payroll reports in QuickBooks Online.

       

      You can always post your reply here if you have any other concerns regarding payroll. Let me know, and I'll help you out. 

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      loridarlin870
      October 12, 2022

      When I choose the net option for my 401K roth, it calculates the 4% contribution off of net pay instead of gross pay. I understand that it is DEDUCTED from net, but I thought it was CALCULATED from gross??

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