We recently began offering our employees SIMPLE IRAs and as a result have begun making contributions on their behalf and matching their own during each payroll. The problem I'm now having is after payday, a transaction comes through from our bank (Wells Fargo) which is the combined total that the company contributed to their plans as well as the amount that our employees chose to withhold and contribute themselves.
While the bank transactions for Direct Deposit paychecks are matching through transactions created by QB, I'm not able to matching this IRA transaction and I'm not sure where to record it since it is both a Company expense but also includes a portion of employee paychecks withheld.
We are using QB online and QB payroll.
Welcome to the Community. I'm here to lend a hand with recording bank transactions for IRA contributions in QB Online.
You will need to create a payment for the SIMPLE IRA from the Check screen. Here's how:
- Click the Plus icon.
- Select Check.
- Choose the account used for paying liabilities on the Bank Account drop down box.
- Select the account that you're using for tracking the liability payments in the Account details section.
- Enter the amount of the payment.
- Should you have sub-accounts for each agency that's being paid, ensure that the specific amount and accounts are entered for the agency.
- Finish filling out the check as normal and press Save.
If you're unsure of which account(s) to select, you can check the liability preferences with these steps:
- Select the Gear icon.
- Click Payroll Settings.
- Select Accounting under Preferences.
- You will see the current liability preferences under the Tax Liability Accounts.
The following articles contain additional information on this:
I'm only a post away if you should have any questions about payroll deductions or anything else QuickBooks related.. Have a lovely day.
Thanks for this information!
Quick clarification: When I write the check, do I just need to have two lines to indicate how much of the amount is employee deduction and how much is employer contribution, or do I need to have a line item per employee for the check? And contributions would normally come from a separate account than the deductions correct?
Thanks in advance for the additional clarifications!
Hi again, @branholm,
You're most welcome for the information. I'd be glad to provide some additional clarification about managing IRA Contributions.
Provided that the SIMPLE IRA is set up with an employee deduction and a company contribution, QuickBooks Online will record both of these to one liability account. This is going to be similar to how QuickBooks records liabilities for FICA taxes (Social Security and Medicare), where money is withheld from an employee's check and matched by the company with the funds being tracked with one liability account.
I'm including a video to show how QuickBooks tracks a SIMPLE IRA with a setup of deducting $50 from the employee's paycheck and a company-paid contribution of $25.00. This will also show how the total of $75.00 is tracked with one liability account:
Should you be unsure of which liability account is being used to track the IRA, my above post contains information on locating this. Additionally, the article on creating a payroll liability check is a guide with further information.
Lastly, as all are businesses are unique, you may wish to reach out to your accountant to determine if it would be best for you to indicate on the check which portion is contributed by the employees and the company. Naturally, if there is one IRA setup, and thus one liability account, then breaking the payment into pieces will reduce the liability account by the same amount as doing it with just one amount and vice versa.
I hope that you had a wonderful Halloween. Please feel free to let me know if you have any additional questions. Wishing you all the best.
Thanks for the further clarification - after actually looking into Quickbooks about these issues I see exactly what you're referring to now.
I'm wondering however, in order for our budgets to match our P&L, is there a way to have Quickbooks record company contributions and employee deductions in separate liabilities?
Hello again, @branholm,
I hope that you've had a pleasant weekend. It's nice to hear that you're finding this information helpful and clarifying the questions that you have.
I can provide information to your question about there being a way for QuickBooks to record company contributions and employee deductions in separate liabilities so that the budget matches your P&L. A Profit and Loss report is going to track income and expense accounts, but not liability accounts, such as the one for the IRA contributions. Similarly, budgeting in QuickBooks Online also tracks income and expense accounts and not liability accounts. I'm including an article with additional information on budgeting in QuickBooks Online: How to Create Budgets and How Does Budgeting Work?.
The paying of a liability account is not going be an expense, or income, as it's paying something that the company is responsible for. One way that it can be looked at is if a person buys a computer using a credit card, the expense is going to be the computer and not the paying of the credit card bill. If this could be counted as an expense then a business could, in theory, take out loans and pay them immediately off and count them as expenses.
In order to track the IRA contributions made by the company, you can review the associated expense account from within the payroll settings. This would be an option to factor in these contributions when preparing the company budget. Here's how:
- Select the Gear icon and click Payroll Settings.
- Choose Accounting under Preferences.
- Review the account within Company Contribution Expense Accounts.
- If you should need to change it, select Customize at the bottom.
- Select the Upside down triangle next to the Retirement Contribution Account and choose the account that you'd like to use.
- Select Ok at the bottom of the page.
If you're needing to determine how much was contributed by employees and the company within a time period, one solution is to run a Payroll Deductions & Contributions report. You can do this with the following steps:
- Select Reports on the left navigation menu.
- Type in and select Payroll Deductions/Contributions in the report search bar.
- Filer the report for the desired date range.
- Click Run Report.
- You can see a breakdown of the amounts by selecting the blue number under PLAN TOTAL.
I've included a brief video to serve as a demonstration:
I hope that this post finds you with a smile. The Community has your back and is here should you have additional questions.