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Level 1

Booking a S Corp Profit Sharing contribution to 401k

I am trying to do the necessary booking for an employer profit sharing contribution to my individual 401k. My company is a single owner LLC with a S Corp election. I pay myself a salary and have determined the amount I am allowed to contribute to the plan, 25% of the paid wages. I am not sure what accounts need to be setup in QBO and what journal entries to make to show the money moving from retained earnings to employee benefits and then getting paid out to the 401k vendor. I appreciate any help that can be provided.

Level 8

Booking a S Corp Profit Sharing contribution to 401k

Setup expense account called "401k ER PS Contribution."  (EE Fringe Benefits)


Write check and the entry will debit the account above and credit Cash/Bank account. 


That entry will automatically take the money out of Retained Earnings.

Level 1

Booking a S Corp Profit Sharing contribution to 401k

Thanks for the help Teri.


I forgot to mention the contribution is for 2018, but I am just now making the transfer from my business to the 401k account. Would the steps be any different? What category should the entry in my business checking account once it is processed be put in?



Level 8

Booking a S Corp Profit Sharing contribution to 401k

I was going to ask which year the contribution is to be applied to.  My understanding is that you have until March 15th (tax return due date for biz) to make contributions for the previous year.


If you do accrual-basis accounting, as all my clients do, you would accrue this expense in 2018, even if you did not make payment until 2019, which is when the cash would be paid for liability.


I will assume you are doing cash-basis accounting, so then your accounting transaction occurs when cash changes hands, so on the date you make actual payment is when you record entry.  


I am not a tax accountant, so I do not give tax advice, so some others may chime in here, but I am an S Corp owner and contribute to my SEP IRA annually, same as most of my clients.   


I made contributions in current year and in Q1 for prior years and made the same entry on my books as described.  Tax returns reflect what year your contributions would be applied to.

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