OK, I have spent the last hour reading all the posts about SEP IRAs trying to find my answer and I have never seen so much confusion by both the OPs and the responses. Plus a ton of broken links because QB reorganized things. Lots of people want to know the answer to this same question, so I'm going to try to state it clearly. Please read the explanation before answering so you don't contribute to further confusion. QUESTION: How do I record a SEP IRA payment so that it is properly included in the correct year? Example, my S-Corp makes a 2019 contribution to Employee/Owner SEP IRAs in February 2020. Application: QBO (Do not include QB Desktop or Payroll services or any other add on features)Payment: SEP IRA (Do not include SARS, Simple IRAs, or other types of IRAs) Important things to know about SEP IRAs:The Employer is paying a business expense when they pay the SEP IRA contribution. It is not a withholding from the Employee.The Employer pays the contribution to the SEP IRA accounts in the Employee's name at the institution. Some institutions have you set up a business login so you can make all payments at once, but the SEP is owned by the individual, not the business. The Employer can contribute to the SEP IRA during the tax year or until taxes are filed in the following tax year. As an S-Corp, you Jane Doe are both a Business Owner (% Shareholder) and an Employee. You have to think of the business transactions as Employer transactions and your personal retirement savings as personal assets of the employee. I believe from what I have read that the correct answer would be to create the SEP IRA as a liability in 2019 so that the amount shows up in your 2019 records and then show the payment to the institution in 2020 as paying that liability. Could someone please confirm that this would work or explain a cleaner way to do it?

Hi there, @2morses. Let me add some info about the Simplified Employee Pension Individual Retirement Arrangement (SEP-IRA) in QuickBooks Online (QBO). Under the IRS guidelines, SEP-IRA plans don't need to be reported on the employee's W-2. However, their W-2 must have box 13 for retirement plans checked. To have this done, please contact our QBO Support Team before the end of the current year in the 4th quarter. You can refer to this article for more info about retirement plan deductions and contributions in QBO. It contains the steps on how to set it up, etc.: Things to learn about retirement plan deductions and contributions in QBO. Also, currently, QBO doesn't support SEP-IRA contributions. What you can do for now is to create an expense check and ensure to record the payments under "Other Current Liability" in your chart of accounts. However, you'll have to consult with your accountant or a tax expert for the best advice on how to record this properly. To create an account under the Chart of Accounts, here's how:Go to the Accounting menu, and then click New under the Chart of the Accounts tab.Choose Other Current Liabilities as the Account Type, and then pick Other Current Liabilities as the Detail Type.Type in the Specific Name and Description for the account.Click Save and Close to confirm the actions made.Once done, create an expense transaction for the SEP-IRA contribution. I'll guide you how:Go to the Expenses menu, and then click New Transaction.Choose Expense, and then choose to whom would you like to send the contribution(payments).Under the Account Details, look for the account you've created.Enter the rest of the expense details, and then click Save and New or Save and Close. At the end of the year, you'll just have to open the Transaction Detail by Account report. Then, filter it to show only All the Current Liabilities Account. This way, you'll see all the SEP-IRA contributions you've recorded. You'll also want to learn on how to make payroll tax payments in QBO. This is to prevent penalties due to late payments. For more details, please refer to this article: How to make payroll tax payments. 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.

2

2morses

Question

2020: SEP IRA contributions records in QBO

Forum|Forum|6 years ago
June 13, 2020
3 replies
0 views

OK, I have spent the last hour reading all the posts about SEP IRAs trying to find my answer and I have never seen so much confusion by both the OPs and the responses. Plus a ton of broken links because QB reorganized things. Lots of people want to know the answer to this same question, so I'm going to try to state it clearly. Please read the explanation before answering so you don't contribute to further confusion.

QUESTION: How do I record a SEP IRA payment so that it is properly included in the correct year? Example, my S-Corp makes a 2019 contribution to Employee/Owner SEP IRAs in February 2020.

Application: QBO (Do not include QB Desktop or Payroll services or any other add on features)

Payment: SEP IRA (Do not include SARS, Simple IRAs, or other types of IRAs)

Important things to know about SEP IRAs:

The Employer is paying a business expense when they pay the SEP IRA contribution. It is not a withholding from the Employee.
The Employer pays the contribution to the SEP IRA accounts in the Employee's name at the institution. Some institutions have you set up a business login so you can make all payments at once, but the SEP is owned by the individual, not the business.
The Employer can contribute to the SEP IRA during the tax year or until taxes are filed in the following tax year.
As an S-Corp, you Jane Doe are both a Business Owner (% Shareholder) and an Employee. You have to think of the business transactions as Employer transactions and your personal retirement savings as personal assets of the employee.

I believe from what I have read that the correct answer would be to create the SEP IRA as a liability in 2019 so that the amount shows up in your 2019 records and then show the payment to the institution in 2020 as paying that liability. Could someone please confirm that this would work or explain a cleaner way to do it?

QuickBooks Online

R

ReyJohn_D

Hi there, @2morses.

Let me add some info about the Simplified Employee Pension Individual Retirement Arrangement (SEP-IRA) in QuickBooks Online (QBO).

Under the IRS guidelines, SEP-IRA plans don't need to be reported on the employee's W-2. However, their W-2 must have box 13 for retirement plans checked. To have this done, please contact our QBO Support Team before the end of the current year in the 4th quarter.

You can refer to this article for more info about retirement plan deductions and contributions in QBO. It contains the steps on how to set it up, etc.: Things to learn about retirement plan deductions and contributions in QBO.

Also, currently, QBO doesn't support SEP-IRA contributions. What you can do for now is to create an expense check and ensure to record the payments under "Other Current Liability" in your chart of accounts. However, you'll have to consult with your accountant or a tax expert for the best advice on how to record this properly.

To create an account under the Chart of Accounts, here's how:

Go to the Accounting menu, and then click New under the Chart of the Accounts tab.
Choose Other Current Liabilities as the Account Type, and then pick Other Current Liabilities as the Detail Type.
Type in the Specific Name and Description for the account.
Click Save and Close to confirm the actions made.

Once done, create an expense transaction for the SEP-IRA contribution. I'll guide you how:

Go to the Expenses menu, and then click New Transaction.
Choose Expense, and then choose to whom would you like to send the contribution(payments).
Under the Account Details, look for the account you've created.
Enter the rest of the expense details, and then click Save and New or Save and Close.

At the end of the year, you'll just have to open the Transaction Detail by Account report. Then, filter it to show only All the Current Liabilities Account. This way, you'll see all the SEP-IRA contributions you've recorded.

You'll also want to learn on how to make payroll tax payments in QBO. This is to prevent penalties due to late payments. For more details, please refer to this article: How to make payroll tax payments.

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.

M

MT Ruby

SEP contributions are discretionary and as such do not qualify as a liability under GAAP. The credit side of the SEP contribution expense should be recorded to equity or retained earnings, as appropriate. The IRS does not give specific direction that SEP payments a business intends to pay should be recorded as a liability, and in the absence of IRS guidance, the balance sheet should be presented following GAAP.

E

EMD Financial

I have a client who has a company contributions to a SEP IRA. I have entered the contribution in the deductions section of the Employee's payroll. It shows as a company contribution on the paychecks and on the P&L statement. How do I match the withdrawals from the business bank account for retirement to the company contribution entered on the paychecks? When the direct withdrawals show up in the banking section, it only gives me the option to add. If I add, the contribution will be double counted.

MJoy_D

I can help you match that contribution, @EMD Financial.

You can match this transaction from the For Review tab in order not to duplicate the transaction.

Check the following criteria to find a match for this transaction:

Verify these transactions have not already been reconciled.
Make sure the payroll entries have not been previously matched to another bank loaded transaction.

You can now match these transactions:

From the left menu, select Banking and go to the For Review tab.
Click the radio button for Find match.
Select a transaction to match.
Click Save.

You can check out this helpful article on matching transactions in QuickBooks Online: Tips for Working in QuickBooks Online’s Bank Feeds: Matching Transactions.

Feel free to let me know if you have other questions. I'll be more than happy to answer them for you. Have a nice day!

E

Essence Business Consulting

The easiest way and most accurate way to do it and also show in both your BS and P&L for reports is:

Jornal Entry #1: 12/31

Retirement Plan (Liability Account): CR $x.xx

Retirement Plan (Expense Account): DB $x.xx

AND:

Jornal Entry #2: xx/xx/xxxx (exactly the date your SEP was paid and withdrawn from your bank account)

Retirement Plan (Liability Account): DB $x.xx

Bank Account: CR $x.xx

OR:

When you download your bank transactions, just put it under your Liability Retirement Plan account.

Doing that, you will zero your liability when it's paid but it will still show on your expense account and liability account for the previous year before you actually pay it.

I hope it helps.

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