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401k Question - Matching

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  • 401k Question - Matching

    This is probably a fairly simple question and thanks in advance for the advice, however was confused after speaking to a friend lately.

    So as far as background, I've been out of training for about 1.5 years. For roughly about the past year, I've worked entirely as a contractor and now have an S corporation and am the only employee of this corporation. All of my income is through the S Corp.

    I opened an individual 401k and was able to barely have it opened before the end of last year (Dec 2018). I was fairly late in the process and only contributed the maximum that I could personally ($18.5k) and was unsure about the process of how to match it with my S Corp or if that was even possible. I guess that is my main question is how to determine if I can use my S Corp to match my own contribution to my 401k and what the calculation for that amount would be.

    Also this is a minor question, but I feel that it could have been a major mistake. When I had opened my individual 401k through E-Trade, the person that I was working with had informed me to use my S Corp EIN and I had gone along with that. However the friend that I had been discussing matters with recently, informed me that it should be have been using my personal SSN.

  • #2
    If your plan allows for profit-sharing contributions you can contribute 25% of your salary as a company-paid profit sharing contribution. You have until you file your S-corp return to fund the contribution.

    How much was your salary?
    Did you report the $18,500 deferral on your W-2?

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    • #3
      Having an S Corp makes a one participant 401k more complex. Your friend that said to use your SSN is wrong.

      employee deferral contributions need to be withheld from payroll and contributed from
      the company account. Not deposited to the 401k from your personal account

      employer contributions also come from the business account

      the max employer contribution is 25% of your W2 box 1 comp

      W2 box 1 comp includes health insurance and HSA contributions if you do it right. Hopefully you’re working with a knowledgeable CPA. Many CPAs don’t know the ins and outs of 401ks very well

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