Quick Search Results

    Not finding your answer?

    View More Results
    Top

    Set up Roth 401(k) and Roth 403(b), and Roth 457(b) plans

    Article ID: 1000687

    Overview

    A Roth 401(k), Roth 403(b), Roth 457(b) are after-tax deductions that are similar to a traditional 401(k),403(b), or 457(b).


    Because the Roth plans are deducted after tax, the employee does not pay the taxes on the amount drawn at retirement. IRS laws state that the Roth 401(k) must report on the W-2 in box 12 with a code of AA and the Roth 403(b) in box 12 with a code of BB, and the Roth 457(b) in box 12 with code EE.


    An employer's 401(k), 403(b), or 457(b) plan may permit an employee to designate some or all of their elective contributions under the plan as designated Roth contributions.


    To view the limits and W-2 Box reporting for these items, see Deferred Compensation Chart or go to www.irs.gov for more information.

    Expected Outcome

    After creating this item, you will add it to your employee's paychecks.

    Assumptions

    You have set up a Roth 401(k), Roth 403(b), or Roth 457(b) plan with a provider for your employees.

    Details

    Set up a Roth 401(k), Roth 403(b), or Roth 457(b):

    From the QuickBooks menus at the top, click Lists > Payroll Item List.

    At the lower left of the Payroll Item List, click Payroll Item > New.

    Select Custom Setup and click Next.

    Select Deduction, click Next.

    Enter a name for the item in the Enter name for deduction box. Give the item a name that will be easily recognized (for example, "Roth 401(k)" or "Roth 403(b)", or "Roth 457(b)").

    Click Next.

    Fill in the required information in the Agency for employee-paid liability window and click Next.

    Select Roth 401(k) or Roth 403(b), or Roth 457(b) for the Tax tracking type and click Next twice.

    Select Neither in the Calculate based on quantity window and click Next.

    Select either gross pay, or net pay and then click Next.

    Do not enter any percent or amount in the Default rate and limit window. Upper limits vary based on the employee's age and should be entered in the individual employee's Payroll & Compensation Information window.

    Click Finish.

    Add the new payroll items to the employee record.

      1. Go to EmployeesEmployee Center.
      2. Double-click the employee in question to open the Edit Employee window.
      3. From the Change tabs: drop-down list, select Payroll and Compensation Info.
        In QuickBooks 2013 and 2014: Click Payroll Info tab.
      4. In the Additions, Deductions and Company Contributions section, select the new payroll items for the Roth 401(k), Roth 403(b), or Roth 457(b) from the Item Name drop-down list.
      5. Click OK.
      6. Repeat these steps for each eligible or participating employee.
    The total amount deducted for 401(k), 403(b), or 457(b) plans cannot exceed the deferred compensation limits for the tax year. This also applies when an employee has both a traditional and a Roth deduction; the combined total cannot exceed the limit.

    To set up a retirement plan company contribution item using Custom Setup:

    1. From the QuickBooks menus at the top, click Lists > Payroll Item List.
    2. At the lower left of the Payroll Item List, click Payroll Item > New.
    3. Select Custom Setup, and click Next.
    4. Select Company Contribution, and click Next.
    5. Enter a name for the contribution and click Next. Do not use the same name entered for the employee deduction.
    6. In the Liability account drop-down list, select the same liability account that you chose earlier.
    7. Select an expense account from the Expense account drop-down list, and click Next.
    8. In the Tax Tracking Type window, select the tax tracking-type classification that matches your plan-type, such as 401(k) Co. Match, 403(b) Co. Match, 457(b) Co. Match, and click Next three times.
    9. If the same contribution rate or amount applies to all or most employees, enter it into the field at the top of the Default Rate and Limit window. The annual contribution limit (if any) should be entered into the lower field only if the limit is the same for all or most employees. If you want a limit for retirement, enter the 50+ rate here as the lower limit has priority.
    10. Click Finish to complete the payroll item setup for the employer contribution.
    11. If the contribution amount is different for some employees, access those employee profiles and edit the contribution amount.

    Comments can not be added at this time.

    Top Answers

    Resources

    Most Used Forms

    Find and download individual and federal forms required for your business.

    Payroll Tax Support

    Stay in compliance, ensure you're up to date on all necessary tax agency information from Federal to State agency

    ViewMyPaycheck

    Give employees 24/7 access to payroll information they need.