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Level 1

Reimburse Employee for Deducted IRA Payment that wasn't contributed

I am needing help with reimbursing an employee for a Simple IRA Deduction we did not contribute.

We had some issues setting up this employee's Simple IRA account where the company told us the account was active when it wasn't and long story short we deducted the employees contribution for four paychecks spanning Oct-Dec of last year. We did not get the account finalized/setup until January 2021. What I'm needing to do is reimburse the employee for the four deductions from 2020 and I also need to cancel out/adjust the company contribution "payments" under payroll liabilities since these were never contributed.

 

Any help would very much be appreciated!

4 Comments
QuickBooks Team

Reimburse Employee for Deducted IRA Payment that wasn't contributed

Hello, kayleep.

 

I'm here to help you reimburse your employee for the IRA deductions and adjust your liabilities. 

 

First, you'll want to reimburse the employee by creating a reimbursement payroll item. Here's how:

 

  1. Go to the Lists menu, then select Payroll Item List.
  2. Click Payroll Item, then choose New.
  3. Select the Custom Setup option button, then proceed with Next
  4. Select the Addition item type, then Next.
  5. Set a name for the addition such as "IRA Reimbursement", then proceed with Next.
  6. Set an expense account.
  7. Select None for the Tax Tracking type.
  8. Complete the rest of the settings for the new reimbursement item.

 

IRA1.PNG IRA2.PNG IRA3.PNG IRA4.PNG

 

Next, you'll want to add this payroll item on the employee's next paycheck:

 

IRA0.PNG

 

This article is a good reference about the steps above: Create a non-taxable reimbursement payroll item.

 

Then, you can cancel out the company contribution by creating an adjustment for the Simple IRA. I recommend checking this article for the steps: Adjust payroll liabilities in QuickBooks Desktop.

 

After adjusting the deductions, this won't show up in your due liabilities. 

 

Ready to pay your employee or perhaps do you need to run payroll reports? Our help articles can guide you through the processes. 

 

I'd be glad to work with you again if you have concerns with the payroll module. Also, I'd be glad to help you out if you have questions for QuickBooks Desktop's processes. 

Level 1

Reimburse Employee for Deducted IRA Payment that wasn't contributed

 
Level 1

Reimburse Employee for Deducted IRA Payment that wasn't contributed

This is helpful, thank you! I created an IRA Reimbursement account and cut the reimbursement check. I put the expense account as “payroll liabilities” for that "addition" account. I then created two payroll liability adjustments, one for the employee’s deductions and another for the company contributions.

I wanted to get some input on the implications of the effective date when doing adjustments. These deductions/contributions were dated in 2020 and we have already closed that quarter/paid our 940 report. The payroll liabilities are cleared now and we show the reimbursement to our employee, the amount of which will show up on their 2021 income. Anything we need to know about doing adjustments on a year that's closed?

Thanks!

QuickBooks Team

Reimburse Employee for Deducted IRA Payment that wasn't contributed

Thanks for coming back to us, @kayleep.

 

To complete your adjustments, I'd recommend consulting with a tax adviser. This way, they can help you reflect the reimbursement and credits.

 

Also, if you want to adjust for last year, you can enter last year's date. If this year, you can also enter the date for this year.

 

You can also check it here about adjusting payroll liabilities in QuickBooks Desktop.

 

Fill me in if you have other questions. I'm always here to lend you a helping hand. Take care!

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