Safe Harbor 401k ER Match

jerbaldw · ‎January 11, 2021

Hello,

New QB user! I've ran through this topic on a couple threads and I'm still not seeing a well explained solution - at least not for a newbie like me :) We currently have a simple IRA ER match up to 3%. We are moving to a 401k, safe harbor QACA match with the following compensation match rules:

Basic match – 100% of salary deferrals up to 1% of compensation, 1, plus 50% on the next 5% of compensation (3.5% of compensation total).

My question. How would I go about setting this up correctly? I understand once I've created a payroll item I just assign it to each EE. I'm struggling how to actually create the payroll item so it reflects the different contribution rates based on EE contribution %.

Thanks!

ReymondO · ‎January 11, 2021

Thanks for posting your concern here in the Community, @jerbaldw.

Before we start, let me thank you for choosing QuickBooks Desktop in managing your business.

Let me help you in setting up benefits for the 401(k) payroll item in your company file. You can use the Custom Setup method when creating the item. This way, it would be easy for you to edit it once need to create certain changes.

Here's how:

Go to List and select the Payroll Item List.
Click the Payroll Item button and select New.
Choose Custom Setup and click Next.
Select Deduction and click Next.
Enter the name of the item and continue by clicking Next.
In the Liability account drop-down list at the bottom, select the liability account that will be used to track this deduction and click Next.
From the Tax tracking type window, select the tax tracking-type classification that matches your plan type and click Next.
Place a checkmark next to any item(s) in the Payroll Item column that will be calculated after this deduction is taken.
Choose Neither in the Calculate Based on Quantity window and click Next.
Enter the rate and select Finish to complete the process.

payroll item.PNG

For more details, you can check out this article: How to set up the 401 (K) retirement benefits in QuickBooks. This will also include the process on how to add the new payroll items to your employee record.

You can also run the payroll summary report to see what you've paid out.

This will show a quick view of your payroll totals, including employee taxes and contributions.

Additionally, you can check our QuickBooks Desktop user guide. This will provide you the resources that you needed in managing your account.

I'm still here if you have other questions regarding your payroll service. Just post your questions here, I'll respond as soon as possible.

View solution in original post

ReymondO · ‎January 11, 2021

Thanks for posting your concern here in the Community, @jerbaldw.

Before we start, let me thank you for choosing QuickBooks Desktop in managing your business.

Let me help you in setting up benefits for the 401(k) payroll item in your company file. You can use the Custom Setup method when creating the item. This way, it would be easy for you to edit it once need to create certain changes.

Here's how:

Go to List and select the Payroll Item List.
Click the Payroll Item button and select New.
Choose Custom Setup and click Next.
Select Deduction and click Next.
Enter the name of the item and continue by clicking Next.
In the Liability account drop-down list at the bottom, select the liability account that will be used to track this deduction and click Next.
From the Tax tracking type window, select the tax tracking-type classification that matches your plan type and click Next.
Place a checkmark next to any item(s) in the Payroll Item column that will be calculated after this deduction is taken.
Choose Neither in the Calculate Based on Quantity window and click Next.
Enter the rate and select Finish to complete the process.

payroll item.PNG

For more details, you can check out this article: How to set up the 401 (K) retirement benefits in QuickBooks. This will also include the process on how to add the new payroll items to your employee record.

You can also run the payroll summary report to see what you've paid out.

This will show a quick view of your payroll totals, including employee taxes and contributions.

Additionally, you can check our QuickBooks Desktop user guide. This will provide you the resources that you needed in managing your account.

I'm still here if you have other questions regarding your payroll service. Just post your questions here, I'll respond as soon as possible.

jerbaldw · ‎January 13, 2021

Thank you!

tracy1016 · ‎April 20, 2021

Our match is doubling when paid out. How can we link the employer contribution to the payroll liability when recording the payment transaction?

MJoy_D · ‎April 20, 2021

I can help you with setting up your employer contribution and payroll liability, @tracy1016.

You’ll just have to link the employer contribution to the payroll liability by setting it up correctly.

Let me show you how:

Go to the Lists menu and choose Payroll Item List.
Click the Payroll Item button and then New.
Select Custom Setup and click Next.
Select Company Contribution and click Next.
Enter a name for the contribution and click Next. Do not use the same name entered for the employee deduction.
In the Liability account drop-down list, select the same liability account that you chose earlier.
Select an expense account from the Expense account drop-down list, and click Next.
In the Tax Tracking Type window, select the tax tracking-type classification that matches your plan-type and click Next three times.
Provide all the necessary information
Click Finish to complete the payroll item setup for the company contribution.

For detailed guidance, check this article: Set up a payroll item for retirement benefits (401(K), Simple IRA, etc.).

You can also refer to the following article to help you use a liability adjustment to correct employees’ year-to-date (YTD) or quarter-to-date (QTD) payroll info: Adjust payroll liabilities in QuickBooks Desktop.

I'm always here if you need further help with your account. Take care and have a great rest of the day!

Angela Griffith · ‎January 17, 2023

Hello, I have the same scenario as mentioned above. Do I put 3.5% in the box that's highlighted in the example? Also, what do I enter in the limit type box or do I leave that blank?

SashaMC · ‎January 17, 2023

Hello Angela Griffith,

Thanks for reaching out to the QuickBooks Community! It would be best to verify that information with your accountant. The example mentioned above does show which box it should go into, but we cannot share how much goes in there. If you don't have an accountant, no worries! We offer a ProAdvisor service. Simply enter your zip code and connect with experts within your area. Many offer a free consultation as well!

Find an Accountant

Let me know if there is anything else I can do for you. I will be around. Take care for now.

kkbarnard · ‎December 30, 2023

How do you do this for Quickbooks online?

RCV · ‎December 30, 2023

Thanks for checking in the Community space, kkbarnard.

If you need to set up a retirement plan deduction or a company contribution in QuickBooks Online Payroll to track and tax it appropriately, there are different types of retirement plans supported in QuickBooks. QuickBooks provides different types of retirement plans. You'll have to make sure to determine which plan you want to set up for your employees and review its contribution limits.

To choose a retirement plan, you can check out with your plan provider for details or visit the IRS website to learn more. Currently, these are the supported retirement plans in QuickBooks:

401(k) / 401(k) catch-up
Simple 401(k) / Simple 401(k)
403(b) /403(b) catch-up
SARSEP / SARSEP catch-up
Simple IRA / Simple IRA catch-up
After-tax Roth 401(k)
After-tax Roth 403(b)

Just identify which plan you want to set up for your employees and review its contribution limits. To learn more about retirement plans, visit the IRS website. Once done, here's how to set up a retirement plan deduction or a company-match contribution item:

Go to Payroll, then Employees.
Select your employee. Then from Deductions & contributions, click Start or Edit.
Tap + Add deduction/contribution.
Choose Retirement Plans in the Deduction/contribution type▼dropdown.
For Type, select the applicable retirement plan. If you need to track a company-only contribution with no employee match, choose Company-only plan.
Enter the name of the provider or plan in Description (appears on paycheck).
Complete the remaining fields. If you have a company match, under Company contribution, select the dropdown menu to choose how you want to calculate the amount. Complete the new fields to enter the amount or percent per paycheck and annual maximum.
Press Save then Done.

To know more information on when a retirement plan is tax-deferred or taxable, go through this article for more information: Set Up or Change a Retirement Plan. Additionally, a contribution to a retirement plan can take the form of either after-tax or deferred compensation. Tax laws impose a limit on the annual contributions that both employees and employers can make. For more details, read this reference: Understand retirement plan contribution limits.

Generating reports to track data is a breeze. To do so, feel free to browse this guide for the instructions: Run payroll reports.

We always aim to serve you best. I'm always ready to deliver further assistance in navigating payroll to achieve your goals. Have a good day ahead!

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Safe Harbor 401k ER Match