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Mar
Level 5

Solo 401k and EITC

A contribution to a 401k at work reduces the income in box 1 of the W2 and thus the earned income. I thought that a contribution to a solo 401k from a 1099-misc as an independent contractor also would decrease the earned income. However, when I enter the contributions on the turbo tax software it does not change the earned income or the earned income tax credit. Is there then a crucial difference in how a regular 401k is treated vs. a solo 401k? Or am I making a mistake in how I enter the information?
8 Comments
Level 3

Solo 401k and EITC

I have the same question about this...

 

How could I get the tax deduction from contributing to solo 401k? Thx

Level 11
Level 3

Solo 401k and EITC

Yes, I did.

 

But I use a software version not the online one.

Level 11

Solo 401k and EITC

in the step x step view, 

 

under Federal Taxes, the 'wages and income' then "i'll chose what to work on"

 

scroll down to 'business items' and then 'business deductions and credits'... the 3rd item down is 'self employed retirement plans'.

 

they don't make it easy to find, but it's there! 

 

be sure to answer 'yes' to whether you contributed to an IRA / 401(k) in 2018 when the question appears. 

 

did that work?

Level 3

Solo 401k and EITC

Thanks!  I did find the self employed retirement plans and I did input the money I contribute. 

 

My problem is that it does not deduct the taxes that I owe...  IIUC, solo 401k contributions should be tax deductible.

Level 3

Solo 401k and EITC

actually... it worked. I misunderstood it. 🙂 Thx

Level 11

Solo 401k and EITC

I tested this in rhe CD version of TT and it worked with no issue

How are you reporting your self employed income? What form is it on?

Level 10

Solo 401k and EITC

An employer sponsored 401(k) does NOT decrease your earned income.  Earned income is box 3 or 5 (income subject to FICA and Medicare tax).  You still pay FICA and Medicare tax on 401(k) contributions.  Therefore, the fact that a self-employed 401(k) does not reduce your earned income is not a conflict.