SIMPLE IRA CONTRIBUTIONS ENTRIES FOR OUTSOURCED PAYROLL

@Tío Pipo 

We have a similar setup (outsourced payroll, employee contributions).  How are you recording payroll now?  You should already have liability accounts set up for federal/state withholdings and unemployment since these amounts are withheld or expensed as of the pay date but are paid at a later time.

Along the same line, you would create another liability account called 'Employee IRA Contributions' or something similar.  Each paycheck, the employee deduction gets assigned to that liability account.  Then, when you make the payment to the IRA account, you will write a check in QB for the total payment and split the payment amount between the liability account (employee contribution) and your company IRA expense (company contribution).  This will clear the balance in the liability account and book the expense for the company. 

Thanks for taking the time to reply, Rainflurry!

I record payroll through a series of accounts under a main Payroll Expenses account. They include Payroll Insurance Expense> Workers Comp> Disability>Insurance Fees and the SIMPLE IRA Matching Contributions, Employer Payroll Taxes, Net Payroll, Payroll Processing Fees. I also created a main Payroll Liabilities account wherein I have placed Employee Withholdings and SIMPLE IRA Employee Contributions. (My accountant, however, asked me to place the Employee Withholdings in a separate "Employees Withholdings Expense" account under the main Payroll Expenses account--I suppose because it otherwise appears that I still owe them that when, in fact, my payroll processor takes care of those amounts withheld on my behalf. 

So, where you say that splitting the payment amount between the liability account (employee contribution) and your company IRA expense (company contribution) " will clear the balance in the liability account and book the expense for the company," does that happen automatically or does it involve some kind of journal entry?

@Tío Pipo 

Both the employee and employer SIMPLE IRA contributions should be put into a liability account on each pay date.  Then, when you record the payment to the IRA, which includes both the employee and employer portions, write a check in QB.   On the expenses tab, assign the liability account(s) and their amount(s).  Writing that check will clear the liability account(s).  Or, you can create a journal entry instead of a check - debit the liability account(s), credit your bank account.  When you write a check in QB, it debits whatever accounts are on the expenses tab and credits your bank account - same as a journal entry.

This is beginning to make sense now, Rainflurry; thank you! So, it does not matter that there is no physical check going out to the SIMPLE IRA company for deposit. I presume, however, that when I download the transaction for the deposit to the IRA, it will match to the check that I have written in QB for each weekly deposit. Is that correct? Also, what do you mean by the "Expenses tab"? Is that something that appears when I write the check in QB?

Hello there, @Tío Pipo. Let me share some insights in recording your payroll outside of QuickBooks.

You can record your payroll outside of QuickBooks by creating a journal entry. However, before you do so, I recommend speaking with your accountant or an accounting professional to determine which account would receive the debit and credit sides of the transaction.

Here's how:

1. From your outsourced payroll service, get your employees' payroll pay stubs or a payroll report.
2. Click the + New button in the left navigation menu.
3. Select Journal entry. 
4. Fill out the fields to create your journal entry.
5. Pick Save and new or Save and close.

About the Expense tab, you can check it under the Transactions tab from the left menu.

For more details about this process, see the below articles:

• Manually enter payroll paychecks in QuickBooks Online
• Create a journal entry in QuickBooks Online

More information on utilizing and setting up payroll can be found in the Getting started with payroll tutorial and the QuickBooks Online Payroll Hub community articles.

If you have any other payroll-related questions, please leave a comment below. I'll be there to assist you. Have a nice day.

@Tío Pipo 

Yes, correct, just match the transaction.  I misspoke on my expense tab reference - that only applies to QB Desktop and I forgot that you're using QB Online.