Some items that affect payroll have two parts. One is a deduction from an employee’s paycheck. Health insurance can be like this when a portion is company paid and part is the employee’s obligation.
Retirement plans are often like this. Some will be deducted from the employee’s paycheck, some will become the employer’s expense.
The employer’s portion of these types of benefits are tied to the paycheck. That is, the amount is determined by the paycheck, and the amount of wages on it. When this happens, QuickBooks can compute and track the amount that is the employer’s obligation.
A payroll item that will serve this function is a Company Contribution type payroll item. Let’s create a company contribution for a SIMPLE IRA for the employee’s of Rock Castle Construction.
Above we have begun to add a new payroll item from the payroll item list. We are using the custom method.
You can see the selection for a company contribution type item being made. The next screen in the process asks for a name for the item. We will use SIMPLE IRA-Company Portion.
The above window allows us to specify the vendor that is the administrator for our plan and the account number. Since this is a company expense, two accounts are necessary in the setup. In our case, we have created new accounts specifically for this purpose.
The first account, SIMPLE IRA Payable is a current liability account. When you reach this point in the setup, QuickBooks will suggest Payroll Liabilities. Using a separate account though gives us a much greater ability to track down any discrepancies should one occur.
QuickBooks will also suggest Payroll Expenses as the expense account. Setting up your own expense account, in this case Employee Benefits, will be a better choice.
Above is a screenshot of the all-important tax tracking type window. Fortunately, from the available dropdown, QuickBooks offers us just the selection we need. SIMPLE IRA Co. Match.
Generally we would not need a default amount as this will be specific for each employee. Neither is this amount based on quantity. Accordingly, you can breeze through the next couple of windows and Finish.
Now, setup each employee with their desired deduction rate and the agreed upon employer rate.
Both payroll items are entered in the same place in the employee edit window.
The next time a paycheck is created, QuickBooks will use both the employee deduction payroll item and the company contribution payroll item to compute the applicable amounts.
Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
12401 Orange Drive #136
Davie, FL 33330