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Self Employed w/ Sub S election

Doug Rousso

I've been working through a number of challenges setting up Quicken to handle my Single Member LLC with a Sub S election.

I have most of it working well at this point and my P&L report is almost there. it's just not quite reporting all the costs of running the business just yet...

I pay myself a reasonable salary to meet the IRS guidelines for the Sub S election. The business expenses work fine. All good. I even have my reporting showing my payroll expenses, health care, etc. I've setup my paycheck to track my income coming from the business, and my pre tax deductions for my solo 401k et. al. So essentially, everything is working well so far, the business is paying me, and I get all those costs covered by the business. Having the sub S election is definately saving me a lot of money in self employment tax come year end.

Now the problem I'm having is that I also contribute "employer contributions" to my employee 401k. (obviously I'm the employee) but when I run my P&L reports for the business, those employer contributions do not show, and I'm stuck trying to figure out how to make it work.

The employer contibutions are essentially just transfers from my business account to my solo 401k account. And it seems that's why its not reporting on my P&L, its not flowing through an expense account that has been tagged as a tax related expense, like all my other business expense categories. I'm just stuck at this point trying to figure out how to get that onto the P&L.

I'd greatly appreciate any help from those pros here on the forum, and maybe some of you here also use Quicken Home and Business like I do to track a single member LLC with a sub S election. Thanks in advance!😉

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Tom Young

"The employer contibutions are essentially just transfers from my business account to my solo 401k account. And it seems that's why its not reporting on my P&L, its not flowing through an expense account that has been tagged as a tax related expense, like all my other business expense categories. I'm just stuck at this point trying to figure out how to get that onto the P&L."

I don't use the Home & Business product so if there's some special magic you have to use in the product to get this to work I can't help, but I'm not understanding "The employer contibutions are essentially just transfers…" statement. An employer (the S Corp here ) takes money out of the corporation's checking account and charges it to an appropriately named business expense and sends the check to the 401(k)'s Plan Administrator. This is no different in form then sending out a monthly rent check to the business' landlord. So the whole process isn't a "Transfer" as Quicken uses that term. In Quicken are you really making a "Transfer?"

If you didn't have the S Corp co-mingled with your personal financial information this would be more clear. The S Corp incurs and expense and the employee records non-taxable income and an increase in their 401(k) account balance.

Doug Rousso

Hi Tom,

"…This is no different in form then sending out a monthly rent check to the business' landlord. So the whole process isn't a "Transfer" as Quicken uses that term. In Quicken are you really making a "Transfer?"

Yes, it really is a transfer. I don't have to send a check to the administrator of the 401K. It's my solo 401k and its in Quicken as an investment account. So it really does book just like a transfer, I "write the check" in the business bank account ledger, and the category is [My Fidelity Solo 401K] (example). I go to the Fidelity website and initiate an electronic trasnsfer of the money. It pulls it from my Business Bank Account which matches the register entry, and when I reconcile (download transactions from my Business Bank), it finds the transaction, marks it as cleared.

I guess I could do two entries, one as the expense, which will clear as normal (like you say, it would just be an expense). And then when I sync my [My Fidelity Solo 401K] (example) bank it will see the deposit.

volvogirl

Did you see Tom Young's last sentence? If you didn't have the S Corp co-mingled with your personal financial information this would be more clear…..

Sounds like you have the S corp accounts in your personal Quicken data file. The S corp should be in a separate data file since you file a separate tax return for the S corp. You can make a copy of your data file and then delete your personal accounts.

Doug Rousso

Hi volvogirl,

Did you see Tom Young's last sentence? If you didn't have the S Corp co-mingled with your personal financial information this would be more clear…..

—Yes I did.

—Nope, that's not necessary at all.

I have Quicken Home and Business. It definately allows a nice seperation without having to split the file. I've very cleanly delineated the Personal Accounts from the Business Accounts and my rental properties, and it allows me to designate Categories and Accounts as either Personal or Business, and I can create Expense, Liability, and all other accounts, including AR/AP. This screen appears on ALL ACCOUNT CREATION methods:

So having one file isn't really the issue. And Tom's comment led me to testing a double entry method that actually works fine. It's an extra step, but works…

Tom Young

Quicken, just about every accounting program I know of, does the accounting for an "entity." Quicken can easily and correctly handle a business that reports on Schedule C because from a legal standpoint there's only one entity involved: "you." Every single thing in the file is legally "yours."

People can and do use Quicken for Single Member Sub S Corps, (don't try that with multi-member partnerships or C Corps), but doing that can cause confusion - case in point here - because there's now two legal entities involved: "you" and a Sub S Corporation. So what you see as a simple "Transfer" entry (as Quicken uses that term) simply doesn't allow for the correct accounting for the two entities involved here, the expense on the part of the employer and the income on the part of the employee. There certainly be other transactions you'll probably encounter that work in the same fashion.

Doug Rousso

https://community.quicken.com/discussion/comment/20401324#Comment_20401324

Truth! Just trying to avoid moving to Quickbooks. So far, I have everything working as it should. Frankly, your comment about treating it as expense rather then transfer set the light bulb on, and like any double entry accounting system, I'm able to make two entries and reporting is working 100%.

Tom Young

"Just trying to avoid moving to Quickbooks"

I assume QuickBooks has "tax reports" that will provide information for whatever form of reporting you use for the S Corp, definitely an advantage over Quicken, but unless you need some other aspect of QuickBooks that Quicken doesn't provide I see no need to go to QuickBooks here.

The advantage that you'd achieve splitting off the S Corp into a different Quicken file is that you're pretty much forced to do "correct" accounting for each entity as you simply can't make the mental mistake of thinking "Oh, the money disappears (or appears) in this S Corp Account and appears (or disappears) in my personal Account, and that's a Transfer!" The disadvantage is that now you need to made entries in two different files.

If you're clear on the concept that in any money transfer between the two entities necessitates "double entry accounting" for each entity, then you certainly can continue to keep the two entities together in one file.