Discussion:SIMPLE IRA-Accounting Question
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Discussion Forum Index --> Tax Questions --> SIMPLE IRA-Accounting Question
| 11 June 2008 | |
| Question: I have an S Corp with a 100% shareholder who has a SIMPLE IRA. Lets say his gross wages are $50,000. The S Corp writes the check for payorll, and the S Corp also writes the check to the SIMPLE Plan, which totals $12,500. So, in the books, I've grossed up the payroll to $50,000, and then I have this $12,500, the SIMPLE IRA payments made by the corp. I know that the 12,500 reduces the employee's wages in box 1 of the W-2, but what do I do with the $12,500 on the books? Does it increase the wages on the S Corp's books since it is techinically payroll? Does it go under deferred compensation? Help please. The books are on a tax basis. | |
| 11 June 2008 | |
| $12,500 equals 25% of $50K. Did you mean SEP IRA or SIMPLE IRA? The answers are different depending on whatcha got.
If SIMPLE IRA how much of the $12,500 represents employee deferral and how much is the employer contribution? | |
| June 11, 2008 | |
| Dr. Wages 50,500
Cr. Simple Payable 12,500 Cr. Accrued Taxes whatever Cr. Cash for the diff. | |
| June 11, 2008 | |
| For a SEPP:
DR. Retirement Plan Expense (I usually use 'other expense' catagory) CR. SEPP Payable (or Cash if funded immediately) Gcpa - is it a SEP or a Simple with ee deferrals? | |
| 11 June 2008 | |
| Ok, guys I think I found the answer. It is SIMPLE IRA, the employee's gross wages were actually (using round numbers) $60,500. The corporation paid the employee a gross amount of 50,000. Then, the corporation wrote a check every month to the SIMPLE IRA as a contribution. Lets say at the end of the year, the contributions totaled 12,500: $2000 was the employers portion and $10,500 was the employee deferral. The corporation gets to deduct the $2,000 on the 1120S, and the $10,500 is booked into the employee's wages to equal the total gross wages of $60,500. I think this is right, what do you guys think? Thanks for the replies. | |
Death&Taxes (talk|edits) said: | 12 June 2008 |
| How can the company contribution to the Simple exceed 3% or am I missing something. | |
| June 12, 2008 | |
| 1815 is company max unless there was a $50 maintenance fee there. | |
| 12 June 2008 | |
| The numbers are just made up, the main question was what to do with the contribution checks written from the corporation to the SIMPLE IRA as the employee deferral. I am classifying the employee deferral part as employee wages on the books, which should agree to the Social Security and Medicare boxes on the W-2, while Box 1 of the W-2 will be gross wages minus the employee deferral. | |
Southparkcpa (talk|edits) said: | 12 June 2008 |
| JR1 has given you the correct answer. Possibly an ACCT 101 course might also be helpful. | |
| 12 June 2008 | |
| Southparkcpa: No offensive to JR1, but he didn't give the right answer for my case. The net payroll is already booked in the system, with no SIMPLE IRA account liability. When I grossed up the payroll, it amounted to $50,000. Then there were checks from the corp to the SIMPLE, and I figured out with clues from this board that these payments are part of the employee wages, so I added the employee deferral to the employees gross wages. Sorry, ACCT 101 is not a place where you learn how to clean up a client's books. Don't be an a@%hole about it. | |
Southparkcpa (talk|edits) said: | 12 June 2008 |
| You should really fill out a profile.... and yes basic bookkeeping would still help in this area. It is basic dr / cr stuff. I have found in my 20 years CPA experience that book keeping J/E's still are important to understand. especially when fixing a clients books.
I assumed you were a do it your selfer with no profile and a very basic bookkeeping question. | |
| June 12, 2008 | |
| If it's an "ee" deferral, the credit for that amount is already on the books SOMEWHERE....just like the payroll taxes that were withheld. So debit that liability, credit cash.
SP - I agree, this is basic accounting. Gcpa - look back at your 1st, 2nd year textbooks. | |
| 12 June 2008 | |
| Well, you didn't even give your own answer to the question, and you're telling me about basic bookkeeping? I think if you were trying to be helpful, you would have given me some insight, and not just agree with someone and tell me I need accounting 101. Second, I understand the basic journal entry for the retirement plan, but since it was done by the client not in the standard "accounting 101" way, I got confused for a second, and later figured it out. I posted on this board for help, not for some a*& to trying to show me how smart they are. Thanks for everyone else though who contributed. | |
| 12 June 2008 | |
| Belle:
I only give attitude when I receive attitude. Also, there was no liability posted in the books for any payroll liability account, nor the SIMPLE IRA. It was just a net check. I just got stuck for a second, but I figured it out. Thanks. | |
| 13 June 2008 | |
| Gcpa
Attitude or not, the maximum employer match for a SIMPLE is 3% of an employees's compensation. See IRC ยง408(p)(2) According to your post, the gross wages = $60,500. 3% times $60,500 = JR1 | |
