When I run payroll, the Simple IRA employee deduction calculates incorrectly. Rather than being a percentage of gross pay, it's factoring in pre-tax deductions first.

We can verify the Simple IRA setup, hburgnm.

SIMPLE IRA plans are tax-deferred. This means that deducted amounts are exempt from federal and state income tax withholding when processed through payroll. However, they're still subject to social security and Medicare taxes. Amounts withdrawn from these plans after retirement are subject to income taxes.

To review the setup to an employee, you can follow these steps:

1. Select the Workers or Payroll menu, then select Employees.
2. Click the employee's name.
3. Select the pencil icon in the Pay section. Scroll down on the deductions section. Then select the pencil icon for Simple IRA. 
4. Review if Retirement Plans is selected under the Deduction/Contribution type.

Then, we can sign out and sign back in to refresh QuickBooks. After that, recreate the paycheck to see if Simple IRA is correctly calculated. You can also click this link for more details about retirement plan deductions and contributions in QuickBooks Online Payroll.

To ensure we address your concern on time, check out our support hours, and on how to get in touch with us so we can help you further.

I'll be here if you have other questions. You take care and have a great day!

A follow-up to this question.  Our employee contribution is percentage based so the amount is different depending on the "hierarchy" of deductions (SIM, Med, dental, etc).  Is there a way for the SIMple IRA amount be calculated first prior to other deductions in order to maximize the pre-tax benefit to employees?  ie.  Can the SIMple contribution be taken out first?

Hello, DI7.

I have information on how SIMPLE IRA is calculated in QuickBooks Online Payroll. 

It depends on the deduction types you've already setup. Pre-tax insurance premiums are taken out first from the gross pay before other taxes and deductions are calculated. We're unable to change how the SIMPLE IRA is calculate in QuickBooks Online Payroll. However, if you don't have any pre-tax insurance premiums, then the IRA contribution will be taken out first. 

This article explains more how to add or change pay types and deductions in QuickBooks Online Payroll: Add or change pay types.

You can also check this article if you need help setting up your SIMPLE IRA deduction: Retirement plan deductions/contributions.

If you'd like to know the year-to-date payroll amounts of your employees, you can run a variety of reports. Check this article for more details: Run payroll reports.

Please check out our other help content for guides in managing your employees, and running payroll. 

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. 

I am having this same issue.  Our Simple IRA contributions are being calculated AFTER other pre-tax deductions (i.e. health insurance premiums and HSA contributions).  I am being told by our financial professionals that this is INCORRECT.  The Simple IRA contributions should be calculated FIRST from the gross pay prior to any other pre-tax deductions being taken out.

Are you saying the financial professionals are incorrect or that they are correct but your software isn't capable of figuring the calculations correctly?

Thanks for joining us here today, @melwils.

I have some information about the Simple IRA contributions. As mentioned by my peer @jamespaul, pre-tax insurance premiums are taken out first from the gross pay before other taxes and deductions are calculated. That said, depending on your employee deduction's setup, QuickBooks will calculate first the pre-tax insurances or deductions.

You can refer to @Catherine_B's steps on how to review your employee setup.

For more information about the retirement plans and their FAQs, check out these links below:

• Add or change pay types

• SIMPLE IRA Plan FAQs

Feel free to also check out our other help topics for your guide in managing your employees, and running payroll. 

Please don't hesitate to drop a reply anytime in this thread if you have follow-up questions or concerns with payroll deductions. I'm more than happy to answer them for you. Take care and have a great day ahead.

I have read all of the information and all of the replies in several threads regarding this subject.  None of that information answers the question I asked, which is:  
Are you saying the financial professionals are incorrect is saying that the Simple IRA deductions should be calculated BEFORE other pre-tax deductions or is QuickBooks incapable of figuring the deduction properly?
I understand that medical insurance premiums are processed first, but this, in fact, is the issue.  The Simple IRA calculation should be processed FIRST. So, again, is QuickBooks capable of calculating the Simple IRA deduction correctly from Gross Pay PRIOR to any other pre-tax deductions?  Thanks.

Hello melwils!

Thanks for the reply. Let me share some details and assist you further with Simple IRA.

I'd like to reiterate what jamespaul mentioned. We're unable to change how SIMPLE IRA is being calculated in QuickBooks Online Payroll. Also, please note that the software is in compliance with the IRS.

You'll want to make sure that you set it up in QuickBooks Online Payroll the right way. Please check these articles for more details:

• Retirement plan deductions/contributions

• Add or change pay types

Keep on posting here if you need more help with payroll. I'll assist you!

I am reporting this problem too.  It is exactly as @melwils says.  The system is calculating percentage based SIMPLE IRA contributions and deductions wrong.  It is not using the gross pay (as the option states).  Instead it is using "gross - pretax deductions" on which to calculate percentages for SIMPLE IRA contributions and deductions.  

I've talked with support on the phone.  At this time it appears Quickbooks is incapable of calculating it correctly.  This is a major disappointment.  If pay never changed, we could use a fixed dollar amount, but if we bonus or wages change - it requires a recalculation every time.  At this point, why not just do the whole thing yourself.

@AlexV  Very disappointing to see this hasn't been fixed in the 2 years since this post. 

According to the IRS:

Compensation

Under the SIMPLE IRA plan rules, what's the definition of compensation for an individual who is not self-employed?

For an individual who is not self-employed, compensation means:

• wages, tips, and other compensation from the employer subject to income tax withholding under section 3401(a),
• amounts described in Internal Revenue Code Section 6051(a)(8), including elective contributions made under a SIMPLE IRA plan, and 
• compensation deferred under a 457 plan. 

Compensation doesn't include amounts deferred under a section 125 cafeteria plan.

so it seems to be doing it correctly for the rest of you....but I'm on desktop payroll and I'm having the opposite problem as you all.  It's calculating the deduction for our Simple IRA on the Gross, before the section 125 deductions.  Help?

I just discovered this issue myself when I was helping a client transfer to a new payroll service. And yes I found the exact same answer from the IRS that the health insurance is supposed to deduct first. Any assistance in fixing QuickBooks Desktop would be much appreciated. 

Thanks for joining the thread, @SMorse. 

As much as I want to help you with this, we're unable to pull up an account here in the Community. 

I recommend contacting our Payroll support team. They have the necessary tool to pull up your account securely. That way, they will know what's causing the issue. 

Here's how you can reach out to them:
 

1. Go to the Help icon and select Contact Us. 

2. Enter your concern, then select Let's talk.

3. Choose to Start a chat or Get a Callback. 

Please consider checking our available hours so we can address your concern timely.

If you want more questions about the IRA, feel free to visit this page: SIMPLE IRA Plan FAQs. 

Know that you can always post your concerns here. The Community is here to help. Take care and have a good one!

Crazy how I have to sign into my Intuit account, that I’ve had since 2016, but you still don’t recognize me. Can you see my eye roll?

I already called. After sharing my screen and explaining the situation, he said he was going to look at the IRS rules. I waited, after a bit he disconnected from the screen share. When I started saying hello?  He just never responded and eventually hung up the phone. 

Why am I paying all this money for a payroll subscription and not getting the help I need to resolve this issue?

QB must be well aware of this problem by now, but choose not to deal with it or inform their employees about the problem.  I feel sorry for the many people who are not accounting professionals who trust that QuickBooks knows what it's doing-- these people may be under taxing & reporting to the IRS!!! 

I watched an online youtube video regarding how to set up a SIMPLE IRA from a supposed QB Expert to make sure I wasn't missing something.  The supposed Expert went along with QuickBooks regular setup instructions said nothing about the tax calculation issue.

The problem with QuickBooks is that people who work for them are not accounting professionals. 

I spent an hour with Payroll help on this issue and was told that I should contact a CPA for my problem because they didn't think the deduction should show as a negative on the employee's pay check!!!  They also told me to send a "debug" message through the "Help" drop down menu--that's all they could do for me.

They other problem is that QB obviously doesn't care to inform it's users of the issue or figure out how to fix it. I agree that the money isn't worth the cost.

I work for 2 companies and see this issue. QB Desktop does not subtract section 125 amounts before calculating but QBO does. 

Any update on this desktop issues. Thanks 

I can share some information on how SIMPLE IRA is calculated in QuickBooks Desktop (QBDT), bazinetcpa. 

Simple IRA is calculated based on the deduction types you've already set up. Pre-tax insurance premiums are taken out from the gross pay before other taxes are calculated.  
However, if this isn't the problem you're facing, I recommend getting in touch with our Customer Care Team. They can review your account and examine your setup.

Here's how to reach them:

1. Open QuickBooks Desktop.
2. Go to the Help menu, then select QuickBooks Desktop Help.
3. Click Contact Us at the bottom.
4. Enter a brief description of your issue, then select Let's Talk.
5. Choose a way to connect.

Also, you may want to check out this link: Set up a payroll item for retirement benefits. This article has the step-by-step process and details on setting up benefits using both EZ and Custom Setup in QBDT for 401(k), Simple IRA, etc. 

Keep me posted in the comments if you have other payroll concerns and questions about simple IRA deductions in QBDT. I'm always ready to help. Take care, and I wish you continued success.