How to handle 401K contributions on a paycheck.

[Guest m3Rheino]

1) I am doing payroll for employees that are now participating in a 401K plan for the first time. Should the taxes for Fed Withholding, Soc Sec and MC be calculated on the remaining amount of pay (gross - 401K contribution) or just the gross amount? 2) If one of the employees is putting 100% of his paycheck into the 401K, is there any difference in calculating the taxes? 3) When do I have to send it the contributions to the 401K management company. Thanks for your help on this matter.

[No Name]

Pay minus SS and MC is all that's left. If 100% of that (roughly 92% net) is deferred, no Fed taxes. Some states may not follow along. I don't know of any that don't.

Send 401k money ASAP.

[Guest m3Rheino]

Thanks for you help again, but I am still a little unclear on the 1st part of my question; Should the taxes for Fed Withholding be calculated on the remaining amount of pay (gross - 401K contribution) or just the gross amount? For example, if Bob gets paid $1000/pay period and contributes $100/pay period to a 401k, do the fed. with., SS and MC tax the $900 or the $1000. From your initial answer, it appears that the fed. with. is taken on the $900 and the SS and MC taxes are taken on the $1000. Is that true?

[JDuns]

Your question is actually much too complicated for this board.

Yes, 401(k) contributions are deducted from the person's gross pay when calculating federal income tax withholding. So in your example, FIT on $900 and FICA (SS + Medicare) on $1,000

However, there are also state and local income taxes that may have different answers based on the work location (eg, PA taxes 401(k) contributions, some states do not conform to the EGTRAA deductible limits, many local jurisdictions base tax on FICA wages not federal income tax wages .......)

You need to get specific advice from someone who specializes in payroll tax issues (attorney or CPA). ASAP.