Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
solo 401k and tax time question
Old 01-28-2015, 06:07 PM   #1
Thinks s/he gets paid by the post
Lisa99's Avatar
 
Join Date: Aug 2010
Location: The Villages
Posts: 1,327
solo 401k and tax time question

I'm stumped... googled, looked at TurboTax FAQs and still can't figure this out so I hope someone here can help.

DH started an independent consulting company this year. He has no employees. I opened him a solo 401k in Vanguard and funded it with $23k contribution and $10,5k employer match (which I thought was close to the max he'd be able to contribute based on net income).

But as you can see in the screen shot below from Turbo TurboTax shows that we can fund it with more than $40+k in total this year.

What am I missing?
Attached Images
File Type: png i401k.PNG (12.7 KB, 10 views)
__________________

__________________
Lisa99 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-28-2015, 08:34 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
How much did he make? You are allowed to add 20% of compensation as the profit sharing contribution for a sole proprietor. 25% for some other cases. Compensation excludes the "employer" half of self employment taxes. Subject to the maximums. Never really called an "employer match" that I've heard, so that part is a little confusing to me. If the $10,500 was intended to be the 20% "profit sharing" component then you may have contributed a little over the $31,448 Turbo Tax said you could.


Solo 401k | Solo 401k Contributions | Solo 401k Contribution Limits | IRA Financial Group | www.irafinancialgroup.com
__________________

__________________
Animorph is offline   Reply With Quote
Old 01-28-2015, 09:45 PM   #3
Thinks s/he gets paid by the post
Lisa99's Avatar
 
Join Date: Aug 2010
Location: The Villages
Posts: 1,327
Thanks Animorph for the calculator. It's amazing how none of them come up with the same answer. DH grossed $74,500 and had no unreimbursed expenses other than self employment tax. So i401k contribution amt is based on about $69k.

I finally found the rules on Vanguard's small business site where I have the 401k. They break it down simply. It's basically $23000 + 25% of net business income... I can remember that!
Attached Images
File Type: png vanguard.PNG (26.1 KB, 5 views)
__________________
Lisa99 is offline   Reply With Quote
Old 01-29-2015, 12:59 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
That's a nice table. But double check that 25%. That only applied to certain types of businesses when I was using my Solo 401k. I was a sole proprietor, the easiest to set up, and the profit sharing dropped to 20% for that type of business. Other than that, you should be set. Reading through the IRS publications, they don't seem to mention the 20% rate. The link I gave above does mention it. Maybe it has changed recently.
__________________
Animorph is offline   Reply With Quote
Old 01-29-2015, 01:06 PM   #5
Thinks s/he gets paid by the post
Lisa99's Avatar
 
Join Date: Aug 2010
Location: The Villages
Posts: 1,327
Thanks, I have to call Vanguard today about something else so I'll ask them about 20% vs 25%.
__________________
Lisa99 is offline   Reply With Quote
Old 01-29-2015, 01:15 PM   #6
Recycles dryer sheets
 
Join Date: Jun 2012
Posts: 489
Animorph is correct. I'm guessing he'll be subject to the 20% of net income, not 25%.

Vanguard is good about reclassifying contributions if it turns out you went over. It's a bit of hassle in terms of paperwork and then getting a (taxable) check back from VG, but it's better than the potential alternative (audit).
__________________

__________________
someguy is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Solo 401k tax question bizlady FIRE and Money 6 12-13-2014 06:17 PM
Tax strategy: Solo 401K and a LLC? EmptyWallet FIRE and Money 7 12-28-2013 09:40 AM
Solo-401K question wanaberetiree FIRE and Money 7 02-14-2012 07:27 PM
Small Business Tax Shelters Aside From Solo 401k? brewer12345 FIRE and Money 3 01-09-2011 02:41 PM
Solo Roth 401k question summer2007 FIRE and Money 3 07-18-2007 01:12 PM

 

 
All times are GMT -6. The time now is 10:24 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.