How to record SEP-IRA for an LLC?

The SEP-IRA contribution made by the owner of the LLC is a personal retirement transaction and is not related to the business expenses of the LLC. Therefore, it should not be recorded as a business expense in QuickBooks Online.

However, it's important to track these contributions for the owner's personal tax purposes. You can create a separate equity account to track these contributions. Here's a general guide on how you could record this:

1. Go to the Chart of Accounts.
2. Click on New to create a new account.
3. Select Equity from the Account Type drop-down menu.
4. Give the account a relevant name, such as "Owner's SEP-IRA Contributions".
5. Save and close.

When the owner makes a contribution, you can record it as a transfer from the business checking account to this equity account. This way, the contribution is tracked but does not affect the business's profit and loss.

Please note that this is general advice and may not apply to your specific situation. It's always a good idea to consult with a tax professional or a Certified QuickBooks ProAdvisor to ensure you're handling these transactions correctly.

Thank you Michelle. Okay this is clear. To continue my question, later this year the owner will also contribute to SEP-IRA for him personally and to one of our LLC employees. Can you please assist me how to record this transaction? 

Hi there, @Charbel1. I'm here to share some insights about recording SEP-IRA.

At this time, QuickBooks Online (QBO) doesn't currently support SEP-IRA contributions. In the meantime, you can create an expense check and record the payments in your chart of accounts under "Other Current Liability." However, I recommend checking with your accountant or a tax specialist for the best advise on how to correctly record this.

To create an account under the Chart of Accounts, here's how:

1. In the left menu, click Accounting menu.
2. Click the New button under the Chart of the Accounts tab.
3. Choose Other Current Liabilities as the Account Type.
4. Select Other Current Liabilities as the Detail Type.
5. Type in the Specific Name and Description for the account.
6. Click Save and Close to confirm the actions made.

After that, make an expense transaction for the SEP-IRA contribution. 

1. In the left menu, click the + New button.
2. Choose Expense, and then select to whom you'd like to send the contribution(payments).
3. Under the Account Details, look for the account you've created.
4. Enter the rest of the expense details.
5. Select Save and New or Save and Close.

To know more about retirement plan deductions and contributions in QBO, check out this article.: Set up a retirement plan.

Feel free to click the Reply button below if you have other questions in QuickBooks Online. I'll be here to answer it for you. Have a great day.

Please I am still confused what is the correct answer to my first question: if the contribution the owner made is a business expense  or an owner's draw? Since the contribution is tax-exempt, shouldn't I consider the contribution as a business expense? Appreciate your help in this. Best regards.

I'm trying to figure this out myself. Have you received any updates? 

Thanks for participating in this discussion, @CoreAll. Let me step in and address your concern about recording SEP-IRA contributions in QuickBooks Online (QBO).

I recognize the significance of accurately tracking your SEP-IRA contributions within QBO to ensure compliance with tax regulations. However, this is currently unavailable in the software.

In the meantime, you might consider creating an expense check and recording these payments under the "Other Current Liability" category. Before doing so, it is advisable to seek guidance from your accountant or a tax expert to ensure the accuracy of your accounting records.

First, make an account under the Chart of Accounts. Then, create an expense transaction for the SEP-IRA contribution. Here's how:

1. Go to + New and select Expense.
2. Choose to whom you want to send the payment in the Payee dropdown.
3. Locate the account you've created under Category.
4. Fill out the necessary information and click Save and Close.
   

Additionally, here's an article that may guide you in paying your payroll taxes to avoid penalties due to late payments: Pay and file payroll taxes and forms in Online Payroll.

You can always rely on the Community for assistance whenever you require clarification regarding your contribution payments. Just leave a reply below, and we'll be there right away to respond. Wishing you a safe and enjoyable weekend ahead.

In the Chart of Accounts > Account Type field, in addition to naming the account "Owner's SEP/IRA contribution," there is an additional thing that must be done to set it up: selecting the "Detail Type." What should this be? (I'm a sole proprietor and I am trying to make sure my personal retirement contributions are categorized properly. I also made the mistake of treating it as a business expense.)

I too have same question. SEP/IRA contribution is not a business expense, but it has to be tracked in Quickbooks because the money goes out from the business account.

How about using Owner's draw?  That is an equity account that will be zeroed out into retained earnings at the start of the new year but not affect the P&L?

How do we set up a SEP IRA for an LLC company for both the employer and an additional employee in the QB Accountant Desktop 2023?  And will that amount show up on the paystubs?

Thanks for getting involved with this thread, EITC.

You can set up SEP IRA in QuickBooks Desktop (QBDT) by creating a custom payroll item.

Here's how:
 

1. Go to Lists, then Payroll Item List.
2. Use the Payroll Item ▼ drop-down list and choose New.
3. Pick Custom Setup, then click Next.
4. Specify whether it's a Deduction or Company Contribution.
5. Choose the name of your retirement plan provider, or add it, and enter the account number. In your Liability account field, pick an account that tracks the deduction or contribution to be paid.
6. In your Tax Tracking Type window, specify the applicable retirement plan.
7. Under Calculate based on quantity, choose Neither and hit Next.
8. Leave your Default Rate and Limit fields blank. You can add the rate and limit when you add your item to the employee profile.
9. Select Finish.

Next you'll need to add the items to your employee's profile.

In regard to the retirement amounts showing on their paychecks; once set up, they will show on paychecks. The amounts you or your employees contribute to a retirement plan must be reported on Form W-2. So next time you pay your employees, make sure the retirement amounts are showing on their paychecks.

If there's any additional questions, I'm just a post away. Have a wonderful Wednesday!