So I had a sole proprietor and was making SEP IRA contributions, but everything was run through my personal account. I switched to an s-corp. Do I need to 'transfer' the balance of the SEP IRA onto the corporate balance sheet? If so, what is the best way to go about doing that?
Debit SEP IRA (Other Asset)
Credit Opening Balance Equity or Contributions?
The SEP IRA is in my name since I was a sole proprietor, do I need to convert the name of the SEP IRA to my S-Corp name or can I leave it and contribute to it AS-IS?
On my balance sheet, it will be an Other Asset but it will also be a Liability correct? If this is correct, sometimes there is a situation like the end of the year where I will effect an employer contribution, BUT not move the money yet since it is not required until the business taxes are filed. There would then be two different liability accounts? One for the undeposited contribution and the other for the fact that it is a liability owed to the employee?
Or am I doing this all wrong and it should remain in my personal records and not be an asset or a liability on the corporate balance sheet and tax returns?
I am hope I am being clear.
As the sole shareholder of a S corp you are free to set up a SEP-IRA and contribute up to 25% of your salary. But I would think that the S-corp would have to start a new plan. Possibly you can roll your existing SEP-IRA over to the new one but this is definitely a question for your plan administrator. Each plan is otherwise separate.
If you have employees you must contribute to their accounts unless instead of a SEP-IRA you create a single recipient 401k restricted to owner and spouse
OK, thank you. I need to set up a new SEP under the corp. Thank you for answering that. My question stands though.
When I roll it over and it becomes a asset on the corporation balance sheet, what are the journal entries?
On my balance sheet, it will be an Other Asset but it will also be a Liability correct? Sometimes there are situations like the end of the year where I will effect an employer contribution, BUT not move the money yet since it is not required until the business actually files taxes. There would then be two different liability accounts? One for the undeposited contribution and the other for the fact that it is a liability owed to the employee?
- Other Asset
- Liability (since it is the property of myself the employee)
- Liability for undeposited employer contributions
Can you walk me through the journal entries?
If it helps, there are no other employees. I am 100% shareholder and the only employee.
In my efforts to solve this problem, I have learned that the SEP IRA is not setup in the name of the corp, but it is, in fact, set up in the name of the individual and it is just expensed out of the corporation as an employee pension benefit. I hope this helps anyone reading this.
Did you ever get an answer for this question. I've been all over this forum and am not able to find a direct answer anywhere. What is the process for storing the SEP contribution transaction within quickbooks, and where should I look for it in reports.
I could really use that too. I've found some blurbs about payroll, but as a sole proprietor with no employees, I don't have any payroll and have never used that in my quickbooks desktop here. I tried to list it as type "other current liability" and tax line "SEP deduction" but QB flags that as "income tax line that is not compatible with the account type) so I'm clearly doing this wrong. If I list it as just an expense, then it reduces my company's earnings so much that the amount put into the SEP is now about the 20%is allowed.
There has to be a way to enter this without throwing the calculations off.
You'll want to create or write a check and use an expense and asset accounts for your SEP deduction.
However, I recommend reaching out to your accountant for other ways on how to record the deduction.
You'll want to check out this article for more information about setting up payroll items: Set Up A Payroll Item for Retirement Benefits (401(K), Simple IRA, etc.).
Feel free to let us know if you need further assistance. I'd be glad to help.