Jump to content

Employer contributions to employee's Roth IRA


Recommended Posts

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.

Link to comment
Share on other sites

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!


Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Create New...