Tax Year Prior to 2020: Do I report employee solo 401 contribution on Schedule K-1

[noname87]

My wife and I have a LLC treated as a partnership for tax purposes. We set up a Solo 401k. We have made both employer contributions and employee contributions. My question is:

On the partnership Schedule K-1 what 401K contributions are included? Do we include both employee and employer contribuions or just the employer contribution?

[DavidD66]

You would only include employer contributions on the K-1s.  The "employee" contributions are entered when you prepare your personal tax return.

[noname87]

I am confused. Another person post a similar question and recieved this response:

"Assuming that these contributions are to the partnership's retirement plan and that is a type of plan such as a 401(k) that accepts elective deferrals, the code R entries in box 13 of the past year's Schedule's K-1 were done correctly and this year's was not.  The code R entry in box 13 should be the total of both employer and employee contributions to the partnership's retirement plan."

In another post fron same person:

"For these to appear on line 28 of Form 1040, your Schedule K-1 must show with code R in box 13 the total amount of contributions made through the partnership and with code A in box 14 your Net Earnings (Loss) From Self-Employment.  In the follow-up to entering the box 13 code R amount, enter in the Payments to 401K (non-Roth plan) box the portion at was elective deferral and in the Employer Matching Contribution to 401K box the portion that was the profit-sharing contribution."

To clarify, in may case:

My wife and I have a partnership LLC with no employees. This is our only earned income. We have a Individual (solo) 401K with Vanguard. Based on the calculation from PUB 560, chapter 5 (Table and Worksheets for the Self-Employed), we can have a employer contribution (profit sharing of 9288). In addition we want to make an employee contribution of 25,000 (19000 plus 6000 catch up). 

You answer seem to indicate box 13 should be 9288.  Correct?

[ThomasM125]

You do need to enter the full amount of the retirement contribution in box 13 and use the code "R". After you do that in TurboTax, you will have an opportunity to code the contribution as "Payments to 401K (non-Roth plan) and "Employer matching contribution to 401K."

Then, the total contributed will show up on schedule 1 of your form 1040 as it should.

I believe @DavidD66 was referring to a situation where you have self-employment income in addition to partnership or corporate income with a 401-K plan and want to make a SEP or solo 401-K contribution, in which case you would enter the contribution on the personal tax return.

Also, you need to make sure you did not deduct the pension contribution on your partnership return, since that would double up the deduction. 

You can enter pension contributions on your partnership return, but only if they are for employees that are not owners.

[noname87]

This is a llc partnership. The employer contribution is coming from my earned income. 

If I filled out the information as you just suggested I get an error during the federal review using TurboTax Deluxe. 

[VictorW9]

No, only if the partners take a withdrawal from their personal accounts to pay. It should show as a withdrawal rather than the partnership paying for it.

[noname87]

To clarify:

The partnership is a LLC for my wife and I. We sell on Amazon. This is our only earned income.

Employer contribution was 9288 was was paid out of earned income of the partnership.

Employee contribution was 25000 paid out of earned income of the partnership.

What is reported on box 13 of schedule K-1.

If both then turbotax deluxe is happy.

If just employer then turbotax deluxe is happy but I have no place to report the 25K. If I override the entry on schedule 1 then I get an error when I run federal 

[VictorW9]

That's the problem because the employee contribution should not come from the partnership. You can take a draw down from the partnership capital accounts of both you and your wife for $12500. This will reduce your partnership capital accounts by $12,500 for both as that amount should be paid out of your personal accounts. The amount of $12,500 should be in box 19 (Distributions).

[dhutchings]

What was the final resolution to this? I am in the same situation and it is not clear. 

Does the K1 box 13-R include both employEE and employER contributions?

[gloriah5200]

From the Partner's Instructions for Schedule K-1 box 13:

Code R. Pensions and IRAs. Payments made on your behalf to an IRA, qualified plan, simplified employee pension (SEP), or a SIMPLE IRA plan. See the Schedule 1 (Form 1040) instructions for line 19 to figure your IRA deduction. Enter payments made to a qualified plan, SEP, or SIMPLE IRA plan on line 15 of Schedule 1 (Form 1040). If the payments to a qualified plan were to a defined benefit plan, the partnership should give you a statement showing the amount of the benefit accrued for the current tax year.

Find additional information at the following link:

IRS Partner's Instructions for Schedule K-1

Line 15 of Schedule 1 for Form 1040 is referring to the Self-Employed Retirement Plan Contributions Line

(15 Self-employed SEP, SIMPLE, and qualified plans).

Line 15 Self-Employed SEP, SIMPLE, and Qualified Plans If you were self-employed or a partner, you may be able to take this deduction. See Pub. 560

[dhutchings]

Great, I appreciate the general information but would love the specifics. In the original author's case:

"

My wife and I have a partnership LLC with no employees. This is our only earned income. We have a Individual (solo) 401K with Vanguard. Based on the calculation from PUB 560, chapter 5 (Table and Worksheets for the Self-Employed), we can have a employer contribution (profit sharing of 9288). In addition we want to make an employee contribution of 25,000 (19000 plus 6000 catch up). 

"

What number should be on form K1 Box 13 Code R?

What number should be on form 1040 Schedule 1 line 15?

[noname87]

OP here.

I still find this confusing.

The options seem to be:

1) Enter the employer contribution (the LLC owned by my wife and I) in box 13 with the letter R. When asked by TurboTax what this was I listed it as an employer matching contribution even though I never made the corresponding contribution. The matching worksheet which has a better description of what to enter indicates this is correct.

  Enter for elective deferral made by me out of the income listed in box 14 and which came from my personal bank accounts, on my personal return during the business part of step by step.

   Then TurboTax is happy, the federal return is accurate but not sure the Schedule k-1 is.

2) Enter both in box 13. The employer part is listed as employer matching contribution and the employee deferral (including catch up) is listed as a solo 401K contribution.

Result, Turbotax shows error because the deferred part is greater than 19,400 due to catch up contribution. The worksheet says not to include the catch up but that is what TurboTax does. This probably can be fixed manually using the worksheet using overrides but could prevent electronic filing.

In the past I used option 1 which yields the correct personal return. Not sure if Schedule K-1 is correct. Not sure it matters as long as the full amount of taxes owed is correct.

[noname87]

If you go into the worksheet in TurboTax and verify the that TurboTax has enter ]the correct data in the right boxes then =Schedule 1 should list the total of your allowable tax deferred deduction. If you contributed too much then this number will not match your contributions and you have a problem.

[noname87]

Another thought, when the Schedule K-1 is due the LLC might not know what each partner is doing with regards to the employee contribution. The partners at that point might not know since the income is not finalized. So how can box 13 included the employee contribution?

[dhutchings]

Thanks @noname87 I appreciate the follow up. I am going to proceed with the scenario 1 that you described. This seems to be consistent with the intent of all the forms.  I liked how you used concrete numbers in your example and although it seems neither of us got a good final answer from an accountant, I wanted you to know that you helped some random guy on the internet today!