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Discussion:QBooks Payroll-Simple IRA & Sec 125

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Discussion Forum Index --> Accounting Questions --> QBooks Payroll-Simple IRA & Sec 125


Keithwin1 (talk|edits) said:

22 March 2008
i'm taking over a new client formerly using another payroll service (paychex). i'm entering in all year-to-date paychecks, but hit a snag. the company has both sec125 pre-tax health EE deductions and simpleIRA EE deductions. on the payroll journal from paychex, the simpleIRA calc is done AFTER the sec125 deduction. however, in qbooks, the simpleIRA deduction is done BEFORE the sec125 deduction. i cannot figure out which method is correct. i'm worried that when i run my 1st payroll for them, everyone's simpleIRA amounts will be different then they have been so far this year (higher, but still different), and will cause a lot of moaning & complaining & questioning my service. i tried to look in qbooks to see if i could 'force' the deduction order, but cannot find it. help!!

Natalie (talk|edits) said:

March 22, 2008
When I first started reading your post, I thought you were concerned about how the taxes were being calculated. But I think you are concerned about how the IRA deduction is being calculated, correct?

According to Sec. 415(c)(3)(D)(ii) you need to consider the IRA deduction based on total compensation, which includes the Sec. 125 deductions. It seems to me that the way QBs is handling it is correct.

MEMCPA (talk|edits) said:

22 March 2008
Calculation is incorrect per Intuit


Per IRS's Retirement Plans FAQs regarding SIMPLE IRA Plans

What definition of compensation applies for purposes of the SIMPLE IRA plan rules in the case of an individual who is not a self-employed individual?

For purposes of the SIMPLE IRA plan rules, in the case of an individual who is not a self-employed individual, compensation means the amount described in section 6051(a)(3) (wages, tips, and other compensation from the employer subject to income tax withholding under section 3401(a)), and amounts described in section 6051(a)(8), including elective contributions made under a SIMPLE IRA plan, and compensation deferred under a section 457 plan. Compensation does not include amounts deferred under a section 125 cafeteria plan. For purposes of applying the 100-employee limitation, and in determining whether an employee is eligible to participate in a SIMPLE IRA plan (i.e., whether the employee had $5,000 in compensation for any 2 preceding years), an employee's compensation also includes the employee's elective deferrals under a section 401(k) plan, a salary reduction SEP and a section 403(b) annuity contract.

Keithwin1 (talk|edits) said:

22 March 2008
memcpa, thanks, that link was from a 2006 post. i'm shocked it isnt fixed in my 2008 payroll module...

Natalie (talk|edits) said:

March 23, 2008
Sorry, Keith. I stand corrected.

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