I have always done my own taxes, since they’ve gotten gradually more interesting every year and I enjoy researching it. This year I”m wondering if I should have hired a CPA. I live in a very expensive city so I’m afraid to think about how much it would cost… I’m stumped with a bit of a specific question, so if anyone has the knowledge to answer it, thanks in advance. (I think I can also pay Turbo Tax extra to get answers from a CPA.)
I am self-employed and make about $50k per year. I opened a solo 401k with Fidelity. My spouse is a higher earner than me, so one of the functions of my 401k is to reduce our taxable income by dumping as much money into it as possible. I was hoping to contribute the maximum $19,500 to it, which would basically wipe out our tax bill. However, according to fidelity the “account is technically a Profit Sharing Keogh with a 401(k) feature that allows you to make an elective salary deferral contribution to the account. However, the account is considered a Self-Employed 401(k) and is labeled as a Self-Employed 401(k) account on your account statements.” When I check the “Keogh profit sharing box” on Turbo Tax, it says I can only contribute 25% of my income, or about $8000. If I select “Individual 401k elective deferrals” Turbo Tax allows $19,500.
Does anyone know how to answer this very specific question?
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