Simple IRA - Charging Federal Income Tax When it Shouldn't be

tkatke · ‎April 04, 2024

I recently switched from QBD to QBO. The owner of the company has his first few paychecks sent to his Simple IRA account. So he has the salary amount, minus taxes and the rest goes to the Simple IRA. When the Simple IRA is deducted from a paycheck that amount is not subject to Federal Income Tax. In QBD, Federal Withholding amount was always $0 when the paycheck included the Simple IRA. Now in QBO, it's charging Federal Income Tax.

My only idea is that when the data was transferred from Desktop to Online, the payroll item “Simple IRA” was transferred incorrectly. However when I try to compare the QBD payroll item to the QBO payroll item, they look so different that I can’t even figure it out. I'm not sure if that is the problem or if QBO is even capable of doing what I need it to in this area.

See the attachment for screenshot examples.

Maybelle_S · ‎April 04, 2024

Hello there, tkatke. Let me provide details on tax reporting for your employees' paychecks and payroll forms.

In QuickBooks Online (QBO), Federal Income Tax (FIT) calculations use the annualized percentage method, meaning FIT amounts may fluctuate with bonuses or additional pay. Meanwhile, QuickBooks Desktop (QBDT) uses the wage bracket method for FIT calculations, assigning fixed amounts per paycheck based on IRS Pub 15-T tables. In contrast, QBO considers annualized earnings, possibly resulting in FIT fluctuations, despite both methods aiming for accuracy.

Additionally, when allocating Simple IRA funds to the QBDT payroll, the system automatically sets the net amount and withholding to zero, calculating only the remaining taxes. However, in QBO, manual adjustment is needed to zero out withholding and net amounts when allocating to the Simple IRA, requiring adjustment until both are zero. While the process may differ between the two platforms, the result remains the same accurate allocation of funds to the Simple IRA while ensuring correct tax calculations.

To ensure the security and accuracy of your account information, I suggest contacting our Customer Support Team for assistance in adjusting the SIMPLE IRA. They'll be able to securely access your account details, discuss any adjustments you may need, and receive personalized assistance tailored to your specific situation.

Furthermore, you can visit this page to learn more about how QuickBooks calculates taxes.

Moreover, check this link to modify a retirement plan in QuickBooks: Set up or change a retirement plan.

Let me know if you have other questions about handling payroll taxes in QuickBooks. I'm always here to help.

View solution in original post

Maybelle_S · ‎April 04, 2024

Hello there, tkatke. Let me provide details on tax reporting for your employees' paychecks and payroll forms.

In QuickBooks Online (QBO), Federal Income Tax (FIT) calculations use the annualized percentage method, meaning FIT amounts may fluctuate with bonuses or additional pay. Meanwhile, QuickBooks Desktop (QBDT) uses the wage bracket method for FIT calculations, assigning fixed amounts per paycheck based on IRS Pub 15-T tables. In contrast, QBO considers annualized earnings, possibly resulting in FIT fluctuations, despite both methods aiming for accuracy.

Additionally, when allocating Simple IRA funds to the QBDT payroll, the system automatically sets the net amount and withholding to zero, calculating only the remaining taxes. However, in QBO, manual adjustment is needed to zero out withholding and net amounts when allocating to the Simple IRA, requiring adjustment until both are zero. While the process may differ between the two platforms, the result remains the same accurate allocation of funds to the Simple IRA while ensuring correct tax calculations.

To ensure the security and accuracy of your account information, I suggest contacting our Customer Support Team for assistance in adjusting the SIMPLE IRA. They'll be able to securely access your account details, discuss any adjustments you may need, and receive personalized assistance tailored to your specific situation.

Furthermore, you can visit this page to learn more about how QuickBooks calculates taxes.

Moreover, check this link to modify a retirement plan in QuickBooks: Set up or change a retirement plan.

Let me know if you have other questions about handling payroll taxes in QuickBooks. I'm always here to help.

tkatke · ‎April 04, 2024

Thank you for your quick reply!

You mentioned: QBO, manual adjustment is needed to zero out withholding and net amounts when allocating to the Simple IRA, requiring adjustment until both are zero.

How do I do that exactly?

MJoy_D · ‎April 04, 2024

You're welcome, @tkatke. It's our pleasure to help.

To adjust the SIMPLE IRA contribution manually, I suggest reaching out to our Customer Support team. They have the tools to do this payroll correction in a safe and secure environment.

Here's how you can contact our Payroll Support team:

Go to the Help icon to connect to a live support agent.
Select the Search tab and click on the Contact Us button.
Provide us with some information about your concern in the What can we help you with? box and click on Continue.
You'll now be provided options on how to connect to our Customer Support.

You can find more information about the different types of support we offer and their availability by checking out this article: Contact Payroll Support.

Check out this article on how to set up, edit, and delete a payroll deduction item for your employees: Set up, change, or delete employee-paid payroll deductions.

Let me know if you need more information about SIMPLE IRA contributions. I'm always here to assist. Have a great rest of the day!

Topics

Training

Community

Resources

Simple IRA - Charging Federal Income Tax When it Shouldn't be