This is more of a small-business / payroll question, but since there is no such category, I'm posting it here because it's related to retirement account reporting and not wanting to screw up with the IRS.
First, the situation:
- I have a brand new (for 2016) S-Corp with two employees, me and spouse (formerly a sole proprietorship)
- I have a solo 401(k) that I max out for myself and spouse's employee contribution ($18k x 2), and put as much as possible as an employer.
Here are my questions:
1. Can anyone explain why I would want to pay for a payroll service when I can basically just write myself and my spouse paychecks (salary minus tax withholding)?
2. How do I manage employee contributions when it comes to paychecks? Can I just subtract the amount from my paycheck? E.g., say my paycheck after tax withholdings is $3000. If I decide I want to contribute $1,500 per monthly paycheck to my 401k, do I just process the transaction in Vanguard (where I hold the solo 401k), and then subtract $1500 from my paycheck each month? How do I document this?
I have an accountant and plan on meeting with him in a few months, but was hoping to get some input from anyone already doing this here - even if it is to tell me that I should just enroll in a payroll service. (thinking ahead to making W-2s).
Thanks for any thoughts!