So, you decide to invest in your future and open a retirement account, now what? As an employee of your S Corp, you'll benefit from lower taxable income and/or deferred taxes. If you are still deciding which plan is best for you, check out this article.

You'll need to run your retirement contributions and deductions through payroll for W-2 reporting purposes. Ready to set up your retirement account in Gusto?

12/15/20 Update: Do not use this for Traditional and Roth IRA setups. If you have a Traditional and Roth IRA, they will be reported on your personal tax return. No need to run contributions through your business.

In Gusto, you would go to Benefits:

  • Select 401(k) under Add benefits

  • Select Yes - we currently offer Traditional or Roth 401(k) to your employees

  • Click Next

  • Click I’ll Manage 401(k) myself

  • Input Benefit Name (Keep it generic: 401k)

  • Benefit Type: select 401(k) or Roth 401(k)

  • Employee deduction per pay period: Select either percentage of gross pay or a fixed amount: input your employee deduction based on your 401(k) details. This is the amount Gusto will deduct from your employee's wages each pay period (if applicable)

  • Annual deduction limit: Select Use standard limit (The catch-up contribution limit is for employees aged 50)

  • Company contribution (employer) per pay period: Select either a percentage of wage or a fixed amount: enter your company contribution based on the 401(k) details

  • Annual maximum contributions: The maximum amount that your company can contribute for the year.

How will I make my contributions?

You’ll make your contributions from your business checking or credit card account. Gusto does not remit payment to third-party service providers, so please ensure you make these payments yourself.

What if my contributions exceed the annual limits?

The system will prevent you from contributing above the max for the year.

How do I need to map the accounts in Gusto so it syncs correctly with QBO?

Sync the information in Gusto to Quickbooks by mapping it in Settings > Integrations

When Gusto syncs with QBO with each payroll ran, the entry will create a business expense for the employer contribution portion (if option selected) to the Employer Retirement Contributions account on the Profit & Loss statement. The total amount withheld and to be paid to the retirement plan administrator (both employee & employer portions) will be reported under the Retirement Plan Payable liability account on the Balance Sheet.

When the payment is made, you will categorize the payment to the Retirement Plan Payable liability account to reduce the amount due to zero.

If you do not have these accounts in QBO, you will need to add them to your Chart of Accounts and remap them in Gusto once created. If you need guidance on how to create the accounts, please reach out to your Member Relationship Manager (MRM).

How do I add retirement deductions and contributions retroactively?

Questions? Reach out to your Collective team in Slack 😄

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