User Query: How is that calculation entered into the Payroll Item setup for 401k Company Match?

Know What is 401k in the QuickBooks?

The 401k is the plan of retirement savings that is given by the employer to their employees. This helps employees save and invest some amount from their pays before the taxes are done.

What are the 401k retirement plans?

It is the type of a qualified plan that is started by the employer in which employees make a reduction in their salary to contribute on the pre-tax basis. This is for the employees who are eligible for this and the employers may match contributions according to their eligibility and may add the feature of profit sharing to it. This plan has a limit for an annual contribution.

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The types of 401k plans and about them are of 2 types:

  1. Standardized- All the considered wages that compensate are subject to the payment when calculating the deferral. According to the standard, the employer and the employee both have to pay for and according to the plan.
  2. Non-standardized- It has no standard for the plans. In this, the employer and employee can choose not to pay for the retirement deferral.

How to set up the 401k in QuickBooks?

This is for the retirement benefits for the employee so it needs to be set up the payroll using the EZ setup. This setup adds the company contribution automatically to your retirement benefits. To set up the 401k in QuickBooks firstly, set up the payroll and the steps are as follows:-

  1. Open the QuickBooks software
  2. Then go to the menu and click on the Lists option
  3. From the further options, select the Payroll item list
  4. Then click on the Payroll Item list from the lower left side on screen
  5. After that, click on the New button
  6. You have to click on the option as EZ setup and click o the Next button to proceed
  7. In this setup, follow the instructions displayed on your system’s screen
  8. Then take care that if an employee has the income tax that is local then it is not reduced by using this retirement 401k plan
  9. So you have to de-select the local tax option
  10. Now a payroll item is created
  11. Click on the Edit option and verify that the payroll item has all the information of the Vendor that is important.

How to Set Up a 401(k) Employer Match Item in QuickBooks Desktop Payroll

  1. Select Payroll Item List from the Lists menu on QuickBooks desktop.
    1. Note: It is not possible to select Payroll Item List if payroll is not turned on in your QuickBooks file.
  2. To create a payroll item for the employer match portion of an employee’s 401(k) company-sponsored plan, click on Payroll Item at the bottom of the screen, or press Ctrl+N.
    1. Please Note: Employee deductions can be setup in QuickBooks as a completely separate payroll item from these 401(k) accounts.
    2. Please Note: Roth 401(k) plans can be set up similarly to Employer Match plans.
  3. Click Next after selecting Custom Setup.
  4. Click on Company Contribution and then click Next.
  5. You can name your new payroll item ER 401(k) Match and click Next.
  6. You should choose a vendor who will receive your 401(k) payments, such as Charles Schwab.
  7. These 401(k) company matches will be tallied up and paid later into the Payroll Liability account.
    1. Note: It is important to select this liability account because it will be used to bookkeeping future 401(k) employer matches.
  8. To book these company-paid contributions, select the Payroll EXPENSE account.
    1. Note: Employers must make this selection because it is an actual business deduction.
  9. Click Next.
  10. For the Tax Tracking Type, choose 401(k) Co. Match.
    1. Note: This selection is important because it actually affects the following payroll tax forms: 940 & W-2.
  11. Click Next.
  12. This wizard’s Taxes section should not require any changes. Click Next to proceed.
  13. If you intend to utilize the payroll software for calculating 401(k) employer contributions, and you wish to base these contributions on a manual quantity that you input for EACH PAYCHECK or on the number of hours worked by the employee for EACH PAYCHECK, kindly opt for one of these choices.
    1. Note: In many instances, the more likely option is to choose “Neither,” as this amount is typically preconfigured within the payroll profile of each employee. It can be set either as a fixed sum or a percentage of wages. It’s important to have a clear comprehension of gross wages versus net wages in this context.
  14. Click Next.
  15. The company default choice for all employee profiles should be the Default Rate & Limit.
    1. Note: In most cases, this section would be best left blank since it would be most accurate to simply set up the actual amounts within each employee’s profile.
  16. Click Finish.

How to reach us?

Above, you get the way of how to set up the retirement plan 401k in QuickBooks in an easy manner. You have to follow it accordingly and in case, have any queries got connected with the toll-free. The team is available 24/7 hours to help you by providing the best assistance according to your requirements. You can also reach them via email or do a live chat with professionals.

Frequently Asked Questions

  1. How many employees do I need to set up a 401(k)?

    Setting up a 401(k) plan with Guideline requires only a single employee.

  2. What is the accounting entry for 401K?

    The correct journal entry for the employee’s 401K contribution involves debiting the wage expense and crediting the 401K payable, which is categorized under other current liabilities. In contrast, for the employer’s share, the journal entry entails debiting the 401K employer contribution expense account and crediting the identical 401K payable found within other current liabilities.

  3. Are all employees eligible for a 401(k) plan?

    Every W-2 employee is qualified to enroll in a 401(k) plan, contingent upon satisfying any age or length of service prerequisites determined by the company. Furthermore, part-time, hourly, and intern employees are encompassed under this coverage, provided they hold W-2 employee status.

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