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Re: Solo401k contributions

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  • Avatar ASingh86 
    Participant
    Status: Physician
    Posts: 21
    Joined: 05/06/2018

    Hello,

    I have a solo401k and have yet to file my taxes for 2018(filed an extension).  I have two questions.

    First, for 2018 I was a w-2 employee and contributed to my 401k with them and received a match of roughly ~4k.  I also had a IC position and have a solo 401k.  To keep it simple, does the match amount get counted when getting to the maximum of 55k/year for tax-deffered retirement contribution?

    Second, I will be contributing ~35k into my solo401k for 2018.  I use Ameritrade.  Do I have to do my total 2018 contribution at one time in one transfer?  Or can I break it up..

    Example: Transfer 20k into the solo401k today as 2018 contribution.   Then next week transfer 15k, and also label it as 2018 contribution.

    Is that allowed?

     

    Thank you

    #233292 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2381
    Joined: 03/01/2018

    w2 match doesn’t matter

    I assume your IC position is as a sole proprietor? If S corp then things are much more complex and please clarify if so

    how much did you contribute to W2 plan as employee elective deferral for 2018? Your employee deferral limit to your solo 401k will be 18.5k minus that amount

    use these links to verify your contribution amounts. Make sure you do not over-contribute

    https://docs.zoho.com/sheet/published.do?rid=hd3vb2c79aa2e630443d58a05e8140934898a

    https://obliviousinvestor.com/solo-401k-contribution-calculator/

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #233302 Reply
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    Avatar ASingh86 
    Participant
    Status: Physician
    Posts: 21
    Joined: 05/06/2018

    Hello,

    Yes, I am an independent contractor. as a sole proprietor. For my W2 position I contributed my maximum for 2018..

    So, is it 55k – 2018 w2 contribution = solo401k contribution. Or does the match get counted in

    #233362 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2381
    Joined: 03/01/2018

    Re read my post. And I would encourage you to use the links I provided to calculate your allowable solo 401k contribution, entering there your specific numbers.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #233365 Reply
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    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8134
    Joined: 01/09/2016
    1. The match matters for each separate position. For example, your employer cannot contribute profit sharing and match > $37k
      • The 2019 limit is $56k # $55k.
    2. You can make as many separate contributions to your 2018 solo-k to get to your $35k as you wish, but no later than 10/15/19.
      • Referring back to point #1, you could theoretically contribute another $56k to your solo-k, even if you received a full $56k in your W2 position, assuming you have enough profit to do so.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #233397 Reply
    Avatar ASingh86 
    Participant
    Status: Physician
    Posts: 21
    Joined: 05/06/2018

    Thank you both for responding.

    Jacoavalu: I did use the links provided and both links gave me two different amounts for the contribution.

     

    jfoxcpacfp: Thank you for answering the question and making it clear I can contribute more then one time(transfer $) into my solo 401k to equal my 2018 contribution.

    As for your point 2.a.  : I contributed 18,500 in 2018 to my 401k with my employer in my W2 position.  I could theoretically still contribute another 55k to my solo 401k if I made enough money.  The 18,500 would not be counted against the maximum for the solo401k?

    #233702 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8134
    Joined: 01/09/2016
    As for your point 2.a.  : I contributed 18,500 in 2018 to my 401k with my employer in my W2 position.  I could theoretically still contribute another 55k to my solo 401k if I made enough money.  The 18,500 would not be counted against the maximum for the solo401k?

    Click to expand…

    That is correct. You can make the employEE contribution only once across all accounts. You can have unlimited employER profit sharing contributions of up to $56k combined per job (2019) for each unrelated employer. If you make an employEE contribution of $19k at an employer, you can receive only $37k of profit sharing for that employer. For your IC work, you get to start all over again.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #233708 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2381
    Joined: 03/01/2018
    Jacoavalu: I did use the links provided and both links gave me two different amounts for the contribution.

    Click to expand…

    If you get different figures then something is entered wrong. The critical figure is net profit from self employment, which would be your 1099 self employment income minus deductible expenses attributed to your self employment business.

    Your maximum employer contribution to your solo 401k is 20% of net self employment earnings which is self employment net profit minus one half of self employment tax. Your W2 wages also matter because it affects the calculation of your self employment tax, which matters because as per the calculation above affects your net self employment earnings.

    If W2 wages are above the social security wage base you won’t pay SS tax on self employment earnings. If W2 wages are not above the SS wage base then you will pay some SS tax on self employment earnings.

    Feel free to post your relevant numbers here and we can work through it.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #233729 Reply
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    Avatar davidlg16 
    Participant
    Status: Physician
    Posts: 11
    Joined: 03/19/2017

    to piggyback on OP’s question (I dont want to make another separate post)…

     

    To fund a solo401K, do I have to designate at the time of deposit if the money is for 2018 or 2019? (my solo401k was established in 2018)

    I’m assuming I put a comment on the deposit slip “2018 401k” or “2019 401k” something like that?

     

    I see it’s a huge hassle if the employer contribution goes over, so can I deposit 30k now, not label it, and on tax form I say actually 28k was for 2018 and 2k was for 2019 from that single deposit? (I’ve never deposit into my solo401k before, I’ve only rollover into it)

    #234513 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2381
    Joined: 03/01/2018
    Splash Refinancing Bonus

    Have you already filed your 2018 tax return?

    Contribution deadline is tax filing deadline including extensions.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #234535 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1907
    Joined: 02/01/2016

    By default employer contributions are treated as for the current calendar year. However, you have until your tax filing deadline including extensions to claim them as deductions for prior year contributions.

    Your one-participant 401k provider may use a contribution remittance form specifying the year, but that is not reported to the IRS. You should keep the intended year in your records. However, both are overidden by your tax return.

    #234540 Reply
    Avatar davidlg16 
    Participant
    Status: Physician
    Posts: 11
    Joined: 03/19/2017

    I filed an extension for 2018, my new CPA is working on my taxes, that’s why I dont have a final number yet.

    I know it’s somewhere between 20k to 30k for 2018, and since I know I will contribute at least 20k for 2019, I was going to just deposit 50k and then once she calculate the final numbers out, will just say “oh $28745.12 was for 2018 out of the 50k i put in”.

    #234610 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8134
    Joined: 01/09/2016

    I filed an extension for 2018, my new CPA is working on my taxes, that’s why I dont have a final number yet.

    I know it’s somewhere between 20k to 30k for 2018, and since I know I will contribute at least 20k for 2019, I was going to just deposit 50k and then once she calculate the final numbers out, will just say “oh $28745.12 was for 2018 out of the 50k i put in”.

    Click to expand…

    That will work as long as you have adequate supporting SE profits in 2019.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #235158 Reply
    Avatar davidlg16 
    Participant
    Status: Physician
    Posts: 11
    Joined: 03/19/2017

    great thanks

    #235456 Reply

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