Why is the Simple IRA deduction calculating incorrectly when there is a section 125 health insurance deduction present? Should be gross - section125 x Simple %

Instead Quickbooks is calculating the gross x the Simple % without deducting the section 125 first.

Answer

Hello there, mrodgers,

In QuickBooks Desktop, the calculation of deductions is based on their sequence on the employee's payroll information. If you've assigned Section 125 Health Insurance after Simple IRA on the Additions, Deductions and Company Contribution section, the system will calculate Simple IRA first.

Let's correct this by interchanging the deductions position in the employee's setup. Here's how:

  1. Go to the Employees menu, then select Employee Center.
  2. Double-click the name of the employee.
  3. Select the Payroll Info tab.
  4. Under the Additions, Deductions and Company Contribution section, interchange the deduction's sequence under the Item Name column. (Ex. Section 125 Health Insurance first, then Simple IRA second)
  5. Click OK.

I've attached screenshots below for your reference.

To be more familiar with how QuickBooks calculates your payroll taxes, kindly refer to this article: How QuickBooks Calculates Payroll Taxes. It discusses the systems method and explains how we determine federal and state income taxes.

Please let me know if you have other payroll concerns. I'm always here to help.

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IntuitRea , Community Support Specialist
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