How to Set Up a 401(k) Employer Match Item in QuickBooks Desktop Payroll

  1. Open Quickbooks desktop and click on the Lists menu and select Payroll Item List.
    1. Note: If payroll is not turned on in your Quickbooks file, then you will not see the Payroll Item List selection.
  2. You will need to create a new payroll item for the employer match portion of an employee’s 401(k) company-sponsored plan, so to do this click on Payroll Item at the bottom of the screen, or simply select Ctrl+N.
    1. Please Note: Do not confuse this setup with Employee Deductions to these same 401(k) accounts. Employee deductions are a completely different payroll item setup in QuickBooks.
    2. Please Note: This setup can be the same as with an Employer Match portion of a Roth 401(k) plan.
  3. Select Custom Setup and click Next.
  4. Click Company Contribution and click Next.
  5. Enter a name for your new payroll item, such as ER 401(k) Match and click Next.
  6. Choose the vendor name whom you will be submitting these 401(k) payments to, such as Charles Schwab, or the like.
  7. Select the Payroll Liability account where these 401(k) company matches will be tallied up for later payment.
    1. Note: This selection is important because this is the liability account where 401(k) employer match liability payments will be applied against for future bookkeeping.
  8. Select the Payroll EXPENSE account where these company-paid contributions will be booked to.
    1. Note: This selection is important because this is an actual business deduction for the employer.
  9. Click Next.
  10. For the Tax Tracking Type, choose 401(k) Co. Match.
    1. Note: This selection is important because it actually affects the following payroll tax forms: 940 & W-2.
  11. Click Next.
  12. Click Next. Note: You should not need to change anything in the Taxes section of this wizard.
  13. If you plan on having the payroll software calculate the 401(k) employer contributions based on a manual quantity you enter in on EACH PAYCHECK or based on the employee’s hours worked on EACH PAYCHECK, then choose one of these selections.
    1. Note: Most of the times you probably will select Neither as this amount probably will be preset within each employee’s payroll profile, either as a flat amount or a percentage of wages (be sure you understand gross vs. net wages here).
  14. Click Next.
  15. Enter a Default Rate & Limit only if you want this information to be the company default choices for all employee profiles.
    1. Note: Most of the times you probably will want to leave this section blank as it is most accurate to simply set up the actual amounts manually within each employee’s profile.
  16. Click Finish.
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