S-Corp owner / employee with new 401K, Made paycheck contribution only, no S-Corp participation. Where do I report the new 401K and contributions made?

[ue1]

I am an S-Corp owner and the only employee. In 2016 I opened a business 401K. I contributed to it from my paycheck/deduction, but the S-Corp did not contribute at all. My questions are:

(1) Where do I report the new 401K (business/personal taxes)?

(2) Where do I report my own (employee) contributions?

(3) Where will I report future S-Corp contributions?

Thank you.

[dmertz]

(1) All of the contributions are reported on Form 1120S.  The employee elective deferrals must also be reported with code D in box 12 of your W-2; any Roth contributions would be reported on the W-2 with code AA.

(2) Elective deferrals are to be included on Form 1120S line 17, Pension, profit-sharing, etc., plans.  Roth contributions would be included on Form 1120S line 8.

(3) Employer contributions are to be included on Form 1120S line 17, Pension, profit-sharing, etc., plans.

Your Form 1120S line 8 should include only the total amount reported in box 1 of the Forms W-2 prepared by your S corporation.

[inddan]

As the sole owner/employee of an S-Corp, do I calculate the max employer contribution to my 401k as 25% of W2 box 3 (Social Security wages), or box 1 (wages)? It seems more advantageous to calculate based on box 3, but is that allowed? 

Thanks!

[Sam Hopi]

Hi dmertz. I think you meant line 7 instead line8 since line 8 is not related to shareholder employees. 

I am confused regarding elective deferral employee. Why it goes line 17 while it is not expense of S-Corp?

For employer, S-Corp match I can say is fine but for employee's match I did not understand  why it goes line 17! Since it is employee match.

Another question for me is: can more 2% employee of S-Corp establish traditional 401-K? if not what about solo 401-K?

You said:  Roth contributions would be included on Form 1120S line 8........or Line 7? Could you please explain more about this case for non-shareholder and more 2% employees.  Please clarify when we have IRA TRADITIONAL what happens on W-2 and S-Corp side. 

Thanks.

[Mike9241]

401(k) reporting for S-Corp. 

i would say elective employee deferrals do not show on page 1 of the 1120s rather they are part of salary and wages included on line 8 for non-officers and line 7 for officers. Say that a non-officer employee's gross is $15K and $2K is their elective deferral,  I would show $15K on line 8 (the alternative to get the $15 salary deduction would be to put $13K on line 8 and $2K on line 17 but I believe this is incorrect).  only the employer match, if any, would go on line 17.

The IRS recognizes that an S Corporation can sponsor a solo 401(k), also called an individual 401(k).

The caveat is that there must be no full-time common law employees and you and any other owner must have at least 2% of the outstanding company stock.

Despite its unique tax status, an S Corp is eligible to sponsor a regular 401(k) plan. if you go this route you should seek professional guidance because of the various rules that govern contributions, discrimination testing for highly compensated employees and other rules. 

also an S-corp should be wary of classifying an employee as an independent contractor to avoid the 401(k) issue. if caught, the IRS could and has in the past disqualified 401(k) plans. it then taxes every participant on the value of their account. 

you can read 1120 s instructions. look at the instructions for line 17

https://www.irs.gov/pub/irs-pdf/i1120s.pdf 

here's a link discussing employer- Roths. 

https://pocketsense.com/can-employer-contribute-employees-roth-ira-2878.html 

and an IRS link discussing employee IRAs in general which should answer your questions concerning w-2s' and S-Corp reporting

https://www.irs.gov/retirement-plans/plan-sponsor/payroll-deduction-ira 

for any type of employer-sponsored retirement plan, professional advice should be sought. 

[Sam Hopi]

Thanks but I did not get my answer. I was hoped to get my answer for each my question separately. dmertz said different than you.