Hi,

I’m having a hard time figuring out how much I can contribute as an employer to my Solo 401K. Is there a calculator that can do this for me?
Also, various websites give me different deadlines. Some say that the employee portion contribution deadline for 2020 was December 31, 2020 and employer portion deadline is April 15, 2021. Others say that a deadline for both is April 15, 2021.  How can I find out what it really is. I can’t even find this on IRS’ website, or I maybe I don’t know what I’m looking for as all I’m finding is SEP and other plans but not Solo or Individual 401K.

Can someone help me out?

Thank you

The calculators are figuring the maximum amount theoretically, assuming you’ve done everything in advance. You have a special situation, so you need to figure with your actual number of $0 for employee deferral. Also appears that you have a fairly low amount of Schedule C income, hence the way you’d maximize in a perfect world is to just call the whole contribution “employee” and call it a day. But you’re doing this after the fact, so that’s not an option.
 
In this unusual situation, I’d fill out the worksheet in Publication 560 by hand as terran notes – be sure and enter “0” on step 9 for employee deferral. Really isn’t that hard of a worksheet, so just do this by hand.

Also we’re assuming you’re being taxed as a sole proprietor and not some other type of entity.

Actually you only have to go through step 7 it sounds like – steps 9-20 are entirely dependent on having employee deferrals which you don’t have, and it sounds like you also won’t be over the $57K limit either, so whatever you get at step 7 is the number. So quite simple.

Alternative or a way to check your math – look for a SEP-IRA calculator online – I believe that will give you the number you want. I think that should match the “employer-only” SoloK limit.

The ability to open a solo 401(k) after December 31st at all is a new thing within the last few years and people who have done so is kind of an edge case since it only applies the first year, so I expect the calculator author just decided it wasn’t worth customizing and option for that.

Catch up contributions are employee contributions, so no, you wouldn’t be able to make this this year either since you can’t have declared them in time.

The highest value Step 4 can be is 20%, so just use that. It’s kind of silly, but it’s just that the max profit share percentage for a solo 401(k) is 25%, but you can’t make a profit share contribution on the profit share contribution. The table below the worksheet is just solving for the equation X/(1+X) where X is the desired contribution percentage. Assuming you want to max the contribution just use 20% and you don’t need to worry about that though.

Make sure you exclude $10,200 of your unemployment income per the stimulus bill passed Thursday if your total AGI is under $150k. It might take some time for tax software to catch up with this.

This content was originally published here.

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
In this article: