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Heather M1009
January 3, 2019
Question

401(k) set up for a company that uses an outside payroll vendor

  • January 3, 2019
  • 1 reply
  • 0 views

Looking for advise on how to set up a 401(k) in qb on line- We are using an outside payroll company but recently started a 401(k) with employer match.  

 

 

 

    1 reply

    qbteachmt
    qbteachmt
    January 3, 2019

    Here is payroll Math for any one paydate:

    Gross wages + Employer taxes + Employer match = total Expense. There might be a processing fee, too, of course.

     

    If there are any amounts the employer has to pay separately (child support, retirement) through banking that are not taken (impounded) by your Service provider, that's why a Liability account would be included, like this example:

     

    Gross wages + Employer taxes + Employer match = total Expense. Then, any amount being held to pay later is Liability, reducing the banking for this paydate's total banking.

     

    Example:

    $1,000 gross wages + $200 employer taxes (pretend, for FICA, FUTA, etc) + the payroll processor fee of $10 = $1,210 for the Bank Check impounded by the payroll service. They will then pay taxes.

     

    Or,

    $1,000 gross wages + $200 employer taxes (pretend, for FICA, FUTA, etc) + the payroll processor fee of $10 minus $100 to Liability = $1,100 for the Bank Check impounded by the payroll service. Then, later, the Employer pays out the $100 from liability to the Retirement Broker. That = $1,200 total from banking, but one to the payroll service provider and one to the retirement broker, on separate dates.

     

      T
      ThatBkkpr
      January 24, 2019

      So what are the categories you place on the chart of account for the Solo 401k? The client uses ADP to pay themself but the 401K is with ETrade. All contribution by employer are sent directly to ETrade from business bank account while the employee writes checks from their personal bank account for the employee contributions. So all I'm doing is posting the employer side on the business books. Independent of the payroll journal entry from ADP. I only have "401k Company Match" as a other current liability which is post to, is that right? The number is negative.

      qbteachmt
      qbteachmt
      January 24, 2019

      Let's review what "employee" contribution means: "while the employee writes checks from their personal bank account for the employee contributions."

       

      That just completely bypassed all payroll reporting requirements. The person made a Personal Deposit, outside of Payroll, which is not allowed. That's supposed to be Deferred from Compensation, when you discuss the Employee Contribution. So, you just went to Personal, not as payroll.

       

      There still is time to amend 20148 for everything this bypassed. You might need to meet with a CPA that deals with Retirement Plan administration, ASAP. The corporate tax return is due Mid-March, not Mid-April.

       

      Here are some articles for reference:

      https://www.goodfinancialcents.com/solo-401k-contribution-limits-rules-plans/

      https://obliviousinvestor.com/solo-401k-contributions-employee-or-employer/

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