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Employer contributions to employee's Roth IRA


cpa2000
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Question: Can an employer deduct contributions made to an employee's Roth IRA?

The employer has a 401k plan - nothing special to note about the 401k plan. Outside of that plan as a bonus the employer made contributions to one employee's Roth IRA account. They have been grossing up the employees wages for the Roth contribution made. (At least they did once upon a time - it doesn't look like it happened last year.)

To the employer this is basically wages (assuming they grossed up the wages, amend the W-2 from last year if necessary etc), is there any issue with the employer deducting this contribution (as wages I would think)?

The employee would pick up income for the wages (including the grossed up Roth contribution) as income and then not deduct the Roth Contribution.

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No, those amounts are deducted as Regular Salary. When an employer pays an employee (let's say) $100, that employer would have an expense deduction of $100 for employee salary. When that employee defers $20, the employer's deduction for salary becomes $80. However, the employer will now deduct the employer contribution of $20 (since deferrals are treated as Employer Contributions).

If the employee has not made a pre-tax deduction, then the employer would simply take $100 in deduction for salary expense and 0 in deduction for Employer Contribution.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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