401K

Thank you for reaching out with your question about managing 401K contributions. It's great to see your commitment to your employee's financial well-being, @Kristiehamm22.

Creating one check for all employees' 401K and distributing it to each employee's account is unavailable in the program. Yes, you can write a check for each employee but the Federal and State taxes aren't taken out which increases the employee's income, but being responsible for their Federal and State taxes is not possible because their taxes must be reported on Form W-2.

However, you can set up a retirement plan for 401K for each employee in QBO so it'll be reported on your payroll tax forms. When you run a payroll for each employee it will automatically calculate/add contributions and deductions.

You can follow the steps below on how to set up a 401K retirement plan for each employee.

1. Go to Payroll, then Employees.
2. Select an employee.
   
3. On Deductions and contributions, click Edit.
   
4. Select + Add deduction/contribution.
5. On the Deduction/contribution section, select Add deduction/contribution.
6. On the Deduction/contribution type, click Retirement plans.
7. Select 401K, for Type.
8. Enter the name provider or plan Description (appears on paycheck).
9. Complete the remaining fields, then click Save and Done.
   

Please repeat the steps for the other employees for their 401K.

If you want to write a check for each employee, please consult your accountant for advice.

In addition, I'll add helpful articles on handling your deductions and contributions using QuickBooks Online Payroll. These resources will help you set up your retirement plan deductions.

• Set up or change a retirement plan
• Retirement topics - Contributions
• Retirement topics - 401(k) and profit-sharing plan contribution limits

Lastly, you may also run payroll reports or create a payroll summary report in QuickBooks. These articles can help you customize your payroll reports and see what you've paid and your payroll totals.

Please reply here for more clarification on handling 401K contributions in QuickBooks Online, so we can assist you further. We're here to ensure everything runs smoothly for you and your team. Have a great day!

  "Someone said something about having to write a check for each employee and not take out Federal and state taxes (my concern is that will make the employees income increase and they would be responsible for the state and federal taxes on that amount)."

I don't plan to weigh in on the main point of your post, but I'll clear this part up.

With traditional 401(k)s, a couple things happen with the employee-side contributions (the amount that comes out of their paychecks).

First, the social security and medicare taxes are calculated before the 401(k) employee-side contribution comes into play. So, the employee is still paying social security and medicare wages on their full gross wages before the 401(k) deduction.

Second, 401(k) employee-side contributions lower their gross wages for income tax purposes; that is, the amount that would normally show up in Box 1 of a W-2. So, federal and state income tax withholdings are calculated on the remaining gross pay after the 401(k) employee-side contribution is deducted from the gross pay, as contrasted with the social security and medicare tax calculations noted above.

This is because traditional 401(k)s are a way to defer income; federal and state income taxes are paid on the income tax return associated with the year when they withdraw the money from their 401(k) later in life, not on their original paychecks or the income tax returns associated with said original paychecks.

In short, it will not increase the employees' gross income; quite the opposite, in the context of the tax year of the paychecks you are working with.

Of course, this is the case for traditional 401(k)s; Roth, for instance, works differently. If you're not sure how this all works, it's best to consult a tax professional. The staff here aren't trained for this kind of question.