How does QBO payroll calculate Simple IRA contributions when M,D,V pretax $ are involved?

Hi there, RK. I hope everything is well. I'm here to provide information on how QuickBooks calculates contributions.

In QBO Payroll, when calculating Simple IRA contributions with MDV pretax, the system considers the employee's gross pay before any other pretax deductions. The IRA contribution max is calculated based on the employee's annual compensation. You're right that for 2024, the maximum employee contribution to a Simple IRA is $16,000.

Therefore, the employee's family coverage and the yearly premium deduction would directly affect the calculation of the IRA max contribution.

Please know that QuickBooks automatically tracks employee contribution limits in the year 2024. For additional information, check out this article: Employee contribution limits. 

I'll be adding these articles to help you manage your payroll:

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Click the reply button below if you need further clarification concerning IRA contributions. I'm still here, ready to assist you further. Best wishes, RK. 

Happy 2024 but it still feels like 2023!

Thank you for your response, but I'm still confused.  My objective is to give employees with dependent MDV an opportunity to save for their retirement via the offered Simple IRA.  For example:

#1.  The EE Gross salary for the year is $60,000 = $1,923.08 a pay period.  The weekly Gross = after the dependent MDV deduction of $262.00.  Her new gross after MDV deduction = $1,661.08 or $43,188.08 per yr.  She also elected to have 5% of her salary go to her Simple IRA account.   Is her 5% calculated on the $1,661.08 which equals gross annual salary of $43,188.08 *5% = $2,159.40 or $83.05 per pay period.

#2.  If I'm understanding you correctly.  QBO would calculate the 5% on the $60,000 = $3,000 per year or $115.38 per pay period.  Her MDV annual deduction= $6,812.00.  The 2023 annual max for Pretax deductions = $8,300 for family.  The max she would be allowed to contribution is the difference between the IRS pretax limit $8,300 less $6,812.00 =$1,488.00.  She could only contribute $1,488.00 to her IRA for the year despite the limit being $16,000. 

Since the IRA contributions are tax deferred subject to FICA taxes are the IRA contributions considered in the Pretax max?  Please verify which is the correct way to calculate the IRA contributions and if it is subject to the "Pretax" max as outlined by the IRS.  The employee would like to contribute more to her IRA but is limited to the fact that she has children doesn't make a lot of sense to me.

Thank you for your time.  RK 

Thank you, that is very clear.  RK  

It's great to hear from you again, @R K.

Thank you for visiting the QuickBooks Community. I'm glad that the issue you're experiencing has been resolved. Also, It's great to know that my colleague's update was able to help you.

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