How to Record 401k Employer Contributions in QuickBooks Desktop and Online?

Recording 401k employer contributions in QuickBooks is beneficial for businesses as they get tax advantages and support in maintaining clear records for accounting and payroll reporting.

The 401k Employer contribution is an additional contribution made by employers to an employee’s retirement account. It is based on the employee’s contributions. These contributions are also known as matching contributions.

Different types of 401k employer contribution

• Traditional 401(k) plans
• Safe harbor 401(k) plans
• SIMPLE 401(k)plans

Who pays the 401(k) Employer Contributions?

Employers pay the 401 (k) employer contribution, which is placed directly into the employee’s 401(k) account. The amount varies according to the conditions of the individual 401(k) plan and the firm’s policies.

Advantages of 401k Employer Contributions Plans

401k employer contributions boost employee retirement savings without extra costs, enhance compensation value, and reward participation. For employers, they attract and retain talent, improve workforce satisfaction, and offer potential tax benefits.

• For Employee:

1. It raises retirement savings without adding to the employee’s expenses.
2. It increases the pay package’s overall worth.
3. It offers a reward for taking part in the retirement plan.

• For Employers:

1. It provides attractive benefits that aid in luring and keeping talent.
2. It promotes employees’ retirement security, which may result in a happier and more effective workforce.
3. It may give the business tax advantages.

How do you record 401k Employer Contributions in QuickBooks Desktop?

Record 401k employer contributions in QuickBooks Desktop, first set up the company contribution item, add it to the employee’s profile, then enter the contribution amount per period, and save the transaction.

Part 1: Setup the company contribution item

To set up a company contribution item in QuickBooks, navigate to the Payroll Item List, select New, choose Custom Setup, and create the company contribution. Assign liability and expense accounts, and track the contribution item. Finish setup by configuring tax tracking and calculation settings.

Following the step-by-step information below:

Step 1: Navigate to the Payroll Item List

1. Click on the List menu on the screen and then click on the Payroll Item list.
2. Choose the Payroll Item drop-down.
3. Now, hit on New.

Step 2: Mention the item name

1. Choose the Custom Setup option on the screen.
2. Then, hit next.
3. Now, click on the Company contribution option on the screen and then Next.
4. Enter the name of the item and then hit on next.

Step 3: Choose the liability item

1. Choose the name of the agency to which the liability is paid (or add it)
2. Then, enter the account number
3. Now, choose the liability and the expense account where you want to track the item, then select Next. 

Step 4: Track the contribution item

1. In the Tax Tracking Type window, choose the specific contribution item.
2. Then, click on Next twice.
3. Under Calculate based on quantity, choose Neither, then Next.
4. Leave the Default rate and limit fields blank. [ You can add the rate and limit when adding the item to the employee profile.
5. Click on Finish.

Part 2: Add the item to the employee profile

Add a contribution item to an employee profile in QuickBooks, go to the Employee Center, select the employee, and under Payroll Info, click on Additions, Deductions, and Company Contributions. Then, add the 401k Employer Contribution item.

Following the step-by-step information below:

Step 1: Locate the Payroll info

1. Click on the employee’s option on the screen.
2. Now, choose the employee center.
3. Double-click to select the employee’s name.

Step 2: Add the Additions, Deductions, and Company Contributions

1. Click on Additions, Deductions, and Company Contributions option on the screen.
2. Now, add the contribution item [i.e., 401k Employer cONTRIBUTION]

Part 3: Recording 401k Employer contribution

How to record a 401k employer contribution, enter the contribution amount and limit per period, then click Save and close to finalize the transaction.

Following the step-by-step information below:

Step 1: Mention the 401k employer contribution amount

1. Put the contribution amount per period and the limit.

Step 2: Save the transaction

1. Once you are satisfied, Click on Save and close.

How do you record 401 k Employer Contributions in QuickBooks Online?

Record 401k employer contributions in QuickBooks Online, set up the contribution item via Payroll settings, add the contribution details to the employee’s profile, and then review and save the payroll transaction.

Part 1: Setup the company contribution item

Set up a company contribution item, click the Gear icon, select Payroll, then choose Employees. From the list, select the employee you want to set up the contribution for.

Following the step-by-step information below:

Step 1: Navigate to Payroll

1. Click on the Gear icon from the left menu.
2. Now, choose the Payroll option from the drop-down.

Step 2: Select the Employee

1. Click on the Employees option on the screen.
2. Choose the employee from the list.

Part 2: Begin the Deduction and contribution transactions

The begin deduction and contribution transactions, click on Deductions & Contributions, add a new item, select the type, enter the contribution amount or percentage, and set an annual max if needed. Save and close the transaction.

Following the step-by-step information below:

Step 1: Create a New Deduction

1. Click on Deductions & contribution and then click on Start or Edit.
2. Click on + Add deductions/contribution.

Step 2: Decide the Deduction/contribution type.

• Now, select the following:

1. Deduction/contribution type: Choose the contribution type.
2. Type: Choose the specific contribution item.
3. Description: Put the name of the contribution or plan provider.

Step 3: Mention the contribution amount

1. Select how the contribution is calculated under the Company contribution section.
2. Now, put the amount or percent per paycheck.
3. Mention the amount in the “Annual Max” field in case you want to set an annual maximum amount for company contributions.

Step 4: Save the transaction

1. Once you are satisfied, Click on Save and close.

Part 3: Recording 401 k Employer contribution

To record a 401k employer contribution, navigate to Payroll, select the employee, enter pay details, add the 401k contribution, review the payroll summary, and save the transaction.

Following the step-by-step information below:

Step 1: Navigate to the Payroll setting and mention employee details

1. Click on the payroll on the screen.
2. Select the employee.
3. Enter the employee’s hours and other pay details.

Step 2: Add 401k employer contribution

1. Click on + Add deductions/contribution.
2. Choose 401k employee contribution in the deductions/contributions type dropdown.

Step 3 Review & save

1. Review the payroll summary.
2. Submit the payroll once, you’re satisfied.

Conclusion

Recording 401 (k) employer contributions in QuickBooks is crucial to ensure regulatory compliance and keep correct financial records. Through proper account setup and active contribution tracking, businesses can effectively control their payroll expenses and financial information. Accurately registering these contributions guarantees that employees’ retirement benefits are handled, which improves employee trust while also facilitating smooth payroll processing.

Disclaimer: The information outlined above for “How to Record 401k Employer Contributions in QuickBooks Desktop and Online?” is applicable to all supported versions, including QuickBooks Desktop Pro, Premier, Accountant, and Enterprise. It is designed to work with operating systems such as Windows 7, 10, and 11, as well as macOS.