Entering solo 401k contributions in Quickbooks Onine

[unclescrooge]

I'm the sole employee of my Scorp. I've been making employee and employer contributions to my solo 401k for the past 5 years.

This year I'm taking advantage of the California pass-through entity tax (PTET) to make some of my state taxes deductible (over the SALT threshold).

To calculate this my CPA wanted to see my P&L statement from Quickbooks.

He mentioned that I had $140k in payroll expenses but only $7k in payroll taxes which means something was off.
Of the $140k, $40k is solo 401k contributions, which are being categorized under Payroll Expenses.

Is this correct? Is there a better way to do this?

I use a company called Remote Books Online. I've reached out to them about this, but seeing as they are abroad, I don't have high expectations of fixing this.
(I used to have my CPA do the books but he's always late, takes forever to respond and the numbers still never aligned so I outsourced it to someone else).

Thanks!

[MP123]

He mentioned that I had $140k in payroll expenses but only $7k in payroll taxes which means something was off.
Of the $140k, $40k is solo 401k contributions, which are being categorized under Payroll Expenses.

The maximum 401k deferral is $23k, plus $7500 if you're over 50. So $40k is too much, and it would be subject to FICA anyway, so something is definitely off. If part of the $40k is an employer contribution it wouldn't be part of payroll expense or FICA taxable or reduce the $140k in wages.

I would take a look at the 941 forms that were filed each quarter to see how much FICA actually got paid.

[unclescrooge]

He mentioned that I had $140k in payroll expenses but only $7k in payroll taxes which means something was off.
Of the $140k, $40k is solo 401k contributions, which are being categorized under Payroll Expenses.

The maximum 401k deferral is $23k, plus $7500 if you're over 50. So $40k is too much, and it would be subject to FICA anyway, so something is definitely off. If part of the $40k is an employer contribution it wouldn't be part of payroll expense or FICA taxable or reduce the $140k in wages.

I would take a look at the 941 forms that were filed each quarter to see how much FICA actually got paid.

Here are the year-end numbers.

$30,500 was the employee contribution. (I'm over 50)
$25,000 was the employer contribution. How should this be classified in QBO? Is it just an employer expense or a payroll expense?

I'll check gusto to see how they paid FICA.

[Kings over Queens]

I was in a similar situation back in the day and my cpa coded them to pension expense. I never liked the level of granularity and while I no longer own the business, I keep quickbooks for our personal finance, and code employee contributions (me) and employer match to their own accounts, so I can separate growth from the respective contributions.

[MP123]

The maximum 401k deferral is $23k, plus $7500 if you're over 50. So $40k is too much, and it would be subject to FICA anyway, so something is definitely off. If part of the $40k is an employer contribution it wouldn't be part of payroll expense or FICA taxable or reduce the $140k in wages.

I would take a look at the 941 forms that were filed each quarter to see how much FICA actually got paid.

Here are the year-end numbers.

$30,500 was the employee contribution. (I'm over 50)
$25,000 was the employer contribution. How should this be classified in QBO? Is it just an employer expense or a payroll expense?

I'll check gusto to see how they paid FICA.

I'm not sure exactly how it would be classified in QBO, but the $25k employer contribution is not a payroll expense, or subject to FICA, QBO probably has an expense category for it. It's similar to rent or supplies or that sort of thing, just a business expense.

It will eventually find it's way to your 1120S line 17 "Pension, profit sharing plans..."

But the employee deferral ($30500) is part of officer comp (1120S, line 7) and is subject to FICA, along with the rest of your payroll.

[HomeStretch]

You can set up an account called “benefits expense” or “401k expense” to use rather than “payroll expense” to record the $25k employER 401k contribution expense.

That leaves $115k in payroll expense which would result in $8798 in FICA withholdings but only ~$7000 was withheld. Is there anything else in the payroll expense of $115,000 not subject to FICA such as pretax insurance premium withholdings?

[MP123]

That leaves $115k in payroll expense which would result in $8798 in FICA withholdings but only ~$7000 was withheld.

And we should probably figure out if it's just the withholding that was $7000, or if that includes the employer half of FICA (the other 7.65%), in which case it's even further off.

[HomeStretch]

That leaves $115k in payroll expense which would result in $8798 in FICA withholdings but only ~$7000 was withheld.

And we should probably figure out if it's just the withholding that was $7000, or if that includes the employer half of FICA (the other 7.65%), in which case it's even further off.

Very true.

OP, if this is all being commingled, it’s worthwhile to set up a few more GL accounts such as employer 401k expense and employer payroll tax expense.