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    Deduct 401(k) loan repayment from employee paycheck

    Article ID: 1000830


    If an employee has taken out a loan against their 401(k) account, you can set up a deduction for the repayment amount on their paycheck. This article explains how to do that.


    To create a deduction payroll item for a 401(k) loan repayment:

    From the top toolbar of QuickBooks Desktop, choose Lists > Payroll Item List

    Click the Payroll Item button and select New.

    Choose Custom Setup and click Next

    Choose Deduction and click Next.

    Enter a name for the item (for example, 401K Loan Repayment) to use on paychecks. Click Next.

    Enter the name of the agency for the employee-paid liability and the account number for that agency. Click Next.

    Click Tax Tracking Type and select None. Click Next > Next.

    Under Calculate based on Quantity, select Neither and click Next.

    Choose Net in Gross Vs Net and click Next.

    Under Limit Type, add limits if necessary.

    Click Finish.

    To add the repayment payroll item to the employee profile:

    From top toolbar of QuickBooks Desktop, choose Employees > Employee Center, and double-click the employee's name.

    Click the Payroll Info tab.

    In the Addition, Deduction and Company Contribution box, click the next available space under Item Name. A down arrow will appear.

    Click the down arrow to display the list of payroll items and select the deduction item you created for the 401K loan repayment.

    Press Tab key to move to amount column and enter the repayment amount per period and any limits.

    QuickBooks Desktop will automatically display and calculate the 401k loan repayment item and amount specified, in the Preview Paycheck window. You may manually change the default amount on the paycheck detail, if necessary. If you entered a limit, QuickBooks Desktop will stop deducting when the limit is reached.

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