Author Topic: Payroll and retirement contributions (S-Corp)  (Read 11319 times)

Jude

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Payroll and retirement contributions (S-Corp)
« on: May 02, 2016, 12:28:42 PM »
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!

protostache

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Re: Payroll and retirement contributions (S-Corp)
« Reply #1 on: May 02, 2016, 12:46:52 PM »
The answer to number 1 is that a payroll company handles number 2 for you without you having to think about it.

They also handle interfacing with the state on your behalf. For example, my state thinks I owe them thousands of dollars in taxes and penalties, which of course I don't because my payroll company paid it already, and the state's records show the proper payments and amounts. The state just doesn't understand their own forms. All I do is forward the notice to the payroll company and they call me a few days later and tell me it's taken care of, rather than me spending hours with the state that I could instead be selling.

The real answer to your second question is that you subtract $1,500 from Federal (and probably state) taxes, but *not* from FICA. You have to pay both sides of FICA (Social Security and Medicare) on employee contributions. There's a W2 box at the end of the year that documents how much you contributed to retirement plans as an employee.

protostache

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Re: Payroll and retirement contributions (S-Corp)
« Reply #2 on: May 02, 2016, 12:52:44 PM »
Another reason why you use a payroll company is that they file all the forms and make all the deposits for you on the right schedule. Some are monthly and some are quarterly. Sometimes there's three payments in one month, but in February I only see one. Why? No idea. I pay someone else thirty three tax deductible dollars per month so I don't have to think about it.

Altons Bobs

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Re: Payroll and retirement contributions (S-Corp)
« Reply #3 on: May 02, 2016, 01:04:14 PM »
Our bank offers free payroll, so we use that, they do all the calculations and filing for us.  Much easier this way, and it's free!

SilveradoBojangles

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Re: Payroll and retirement contributions (S-Corp)
« Reply #4 on: May 02, 2016, 01:53:50 PM »
Our bank offers free payroll, so we use that, they do all the calculations and filing for us.  Much easier this way, and it's free!

Can I ask what bank you use?

Altons Bobs

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Re: Payroll and retirement contributions (S-Corp)
« Reply #5 on: May 02, 2016, 06:31:21 PM »
Our bank offers free payroll, so we use that, they do all the calculations and filing for us.  Much easier this way, and it's free!

Can I ask what bank you use?

Bank of America.  I know some people don't like them, but we have had no problems with them at all in all these years.  If you use their payroll, their banking is free, and if you bank with them, payroll is free.  :-D

Laserjet3051

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Re: Payroll and retirement contributions (S-Corp)
« Reply #6 on: May 02, 2016, 06:45:29 PM »
I've got an s-corp (in CA) and asked the same question when i first started out. Without going into detail, I am so glad I pay a payroll company, they have been worth their weight in gold. All the federal filings, the precise calculations of payroll taxes, institutional knowledge of how to handle things when they run off the tracks. My advice is to shop around for a value payroll company. I paid a premium at ADP and all I got was headache and pain. Finally landed at a local payroll company at less than half cost with much better service.


Jude

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Re: Payroll and retirement contributions (S-Corp)
« Reply #7 on: May 02, 2016, 11:13:52 PM »
The answer to number 1 is that a payroll company handles number 2 for you without you having to think about it.

Okay, you've convinced me!

Now I just need to find something that isn't to expensive...

Jude

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Re: Payroll and retirement contributions (S-Corp)
« Reply #8 on: May 02, 2016, 11:16:26 PM »
Bank of America.  I know some people don't like them, but we have had no problems with them at all in all these years.  If you use their payroll, their banking is free, and if you bank with them, payroll is free.  :-D

I'm seriously tempted to open a BoA account just for this. Just need to have paychecks autodeposited into a BoA account. I would be okay with that... Hmm, will look into it, unless I find some local companies that are not to costly.

(anyone with recommendations in Seattle?)

protostache

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Re: Payroll and retirement contributions (S-Corp)
« Reply #9 on: May 03, 2016, 07:53:45 AM »
The answer to number 1 is that a payroll company handles number 2 for you without you having to think about it.

Okay, you've convinced me!

Now I just need to find something that isn't to expensive...

I use Gusto. $33/mo for two employees, absolutely worth it in my opinion.

Axecleaver

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Re: Payroll and retirement contributions (S-Corp)
« Reply #10 on: May 24, 2016, 11:40:32 AM »
I'm using Surepayroll, which was bought by Paychex. They've been great about getting my services running smoothly and dealing with all the state filings. I was considering the surepayroll 401k, but ended up going with another company. Gusto is $29 + 6/employee with two months free, Surepayroll is $59 + 2/employee with three months free.

AK

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Re: Payroll and retirement contributions (S-Corp)
« Reply #11 on: May 30, 2016, 08:17:07 PM »
Am starting a biz this year too and this is very timely. I have been at BofA for years and did not know they had free payroll so I will be investigating that!

This community is the best and am so grateful to be apart of it. Keep up the great work fellow mustachians.

BlueHouse

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Re: Payroll and retirement contributions (S-Corp)
« Reply #12 on: May 30, 2016, 09:05:38 PM »
Our bank offers free payroll, so we use that, they do all the calculations and filing for us.  Much easier this way, and it's free!

Can I ask what bank you use?

Bank of America.  I know some people don't like them, but we have had no problems with them at all in all these years.  If you use their payroll, their banking is free, and if you bank with them, payroll is free.  :-D
I used boa payroll Sec. For about 6 months when I first started my s Corp. It was fine and I thought good experience to get a good understanding of the tax requirements and how to turn the crank on payroll. But it took more time than I wanted to spend on it and I also had a contract that had some more rigid requirements, so I changed to Paychex. They do my payroll, all taxes, and 401k for me. It's way too expensive in my opinion for doing something I can do in one hour, but it's completely worth it when my state messes something up and I don't have to deal with it. And that happens much more often than you would think!