@rjs wrote:
@Opus 17 wrote:
Having box 1 zero is not necessarily wrong
It's true that box 1 could be zero, but in the original question pencil123 said "I contributed all of my 2020 salary to Solo 401K..." So the S corp paid him, say $20,000, and he contributed the whole $20,000 to his 401(k), so box 1 is zero. But he also said he withheld $400 for federal income tax. Where did the $400 come from? There's no money left after the 401(k) contribution. I think Mike9241 is right. It doesn't work. Box 2 can't be more than box 1.
OK, I think I follow now.
If the taxpayer paid themselves $25,000 of earned income (box 3 and 5), they would have to withhold $1550 in social security tax and $362.50 in Medicare tax. If they also withheld $400 of Federal income tax, the most they could have contributed to the 401(k) (to show zero in box 1) would have been $22,687.50.
And of course, they must have paid themselves at least a fair wage for the work performed.
Possibly they can issue themselves a corrected W-2 that takes account of Federal, FICA and Medicare withholding so that everything adds up correctly.
