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sbyron
Level 1

Why is an employee's health and dental insurance deduction subtracted from gross pay before the simple ira deferral is calculated? shouldn't it be on pure gross pay?

 
6 Comments
Kendra H
QuickBooks Team

Why is an employee's health and dental insurance deduction subtracted from gross pay before the simple ira deferral is calculated? shouldn't it be on pure gross pay?

Good Morning, @sbyron.

 

Let's work together and get this resolved.

 

Here's how to check to make sure that your deductions are set up correctly:

  1. Select Employees.
  2. Choose the employee's name.
  3. Click on Edit in the Deductions & Contributions section.
  4. Make sure the deductions are set up correctly with the gross pay vs net pay.

Health insurance deductions come first, then Section 125 (Cafeteria Plans) are calculated against the gross after deductions. Deductions can affect your taxes and are used for reducing the net, or take home, of a paycheck to keep aside funds that will be allocated to Healthcare, Garnishments, or other non-cash compensation.

 

However, if this issue continues, I'd suggest giving our Customer Care Team a call. They have tools such as screen-sharing that can help determine what's causing the issue.

 

To reach them:

 

  1. Sign in to your QuickBooks Online company.
  2. Select Help at the top right.
  3. Choose Contact Us to connect with a live agent.
  4. Enter the concern.
  5. Click on the Green Phone button to get the phone number.

Should you need any further information, please don't hesitate to Reply to this thread. Happy Monday!

phillips garden
Level 1

Why is an employee's health and dental insurance deduction subtracted from gross pay before the simple ira deferral is calculated? shouldn't it be on pure gross pay?

How do I do this?

 

"Make sure the deductions are set up correctly with the gross pay vs net pay."

 

I’m having the same issue. The Simple Ira deduction and contribution is being figured on the GrossAmount-Health Insurance amount. That just started happening in 2019.  I want it to be based on the Gross ONLY.

 

Thanks

Margot

phillips garden
Level 1

Why is an employee's health and dental insurance deduction subtracted from gross pay before the simple ira deferral is calculated? shouldn't it be on pure gross pay?

Edit --

 

Actually, I see where I choose gross/net deduction amount. But I have all my employees set to Gross. The system still deducts health insurance first, and THEN calculates the Simple Deduction based on Gross minus Health Insurance.

 

 

Catherine_B
QuickBooks Team

Why is an employee's health and dental insurance deduction subtracted from gross pay before the simple ira deferral is calculated? shouldn't it be on pure gross pay?

Hello there, Margot. 

 

As per the IRS, the Health Insurance is deducted first before the Simple IRA. You can also reach out to your accountant to help you set up and how taxes are withheld on the employee's pay. 

 

If the compensation doesn’t include amounts deferred under the Health Insurance deduction, I'd also recommend contacting our Payroll Care Support by following the steps provided by Kendra H. 

 

Here's an article that will give further information in how retirement plan deductions/contributions works. Let me know if you need more help. 

Tidler
Level 2

Why is an employee's health and dental insurance deduction subtracted from gross pay before the simple ira deferral is calculated? shouldn't it be on pure gross pay?

Where does IRS say that pre-tax deductions (such as health, dental, vision) are to be deducted first, and the net is then what is used to calculate the IRA deduction? I have searched and searched, and as far as I can find, there is nothing that states that.

 

And if it's the case that that's how it should be, then why is it done differently in QB Desktop payroll vs QBO payroll?

Anna S
QuickBooks Team

Why is an employee's health and dental insurance deduction subtracted from gross pay before the simple ira deferral is calculated? shouldn't it be on pure gross pay?

Hello, @Tidler.

 

Allow me to provide some more information about the pre-tax deductions being deducted first.

 

According to the IRS website's cafeteria plan, the employer contributions are typically made according to salary reduction agreements between the employer and the employee. This is when your employee agrees to contribute a portion of his/her salary on a pre-tax basis to pay for the qualified benefits (health, dental, vision, etc.). These salary reduction contributions are not actually or constructively received by the participant. Therefore, those contributions aren't considered wages for federal income tax purposes and not subjected to FICA and FUTA.

 

You can find more information about the Cafeteria Plans from the IRS here.

 

I'm only a post away if you have any other questions or concerns. Wishing you continued success now and in the future!

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