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Returning Member
posted Dec 27, 2024 6:03:56 PM

2024 Roth Individual (Solo) 401k

I have a return where the self-employed income is $7,000. I want to confirm what is the maximum amount I can put into a Roth Individual 401k? I'm unsure how to enter the data for a Roth Individual 401k in TT, because there is a section for Individual 401k and a section for Roth 401k. Which section should a Roth Individual 401k go under?

 

Additionally, I saw that I could put the contribution limit of $23,000 under the Roth 401k section, and it didn't complain about over-contribution. I find this suspicious, because I thought the Roth Individual 401k contribution limit to be the same as the Traditional Individual 401k contribution limit ($6,505).

 

Individual&Roth401k.PNG

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1 Best answer
Level 15
Dec 28, 2024 10:05:29 AM

Contributions to the Solo 401(k) are not permitted to exceed your net earnings from self-employment.  Net earnings are net profit minus the deductible portion of self-employment taxes.  With $7,000 of net profit, your net earnings are $6,505 (assuming that you do not also have W-2 income that would result in your total compensation exceeding the Social Security wage base).  That means that the maximum employee Roth contribution to the Solo 401(k) would be $6,505.

 

TurboTax is incapable of flagging an excess contribution to the Solo 401(k) that is excess only because the contribution exceeds net earnings (the section 415(c) per-plan limit) .  It only checks the entry against the elective-deferral limit (the section 402(g) per-individual limit)

1 Replies
Level 15
Dec 28, 2024 10:05:29 AM

Contributions to the Solo 401(k) are not permitted to exceed your net earnings from self-employment.  Net earnings are net profit minus the deductible portion of self-employment taxes.  With $7,000 of net profit, your net earnings are $6,505 (assuming that you do not also have W-2 income that would result in your total compensation exceeding the Social Security wage base).  That means that the maximum employee Roth contribution to the Solo 401(k) would be $6,505.

 

TurboTax is incapable of flagging an excess contribution to the Solo 401(k) that is excess only because the contribution exceeds net earnings (the section 415(c) per-plan limit) .  It only checks the entry against the elective-deferral limit (the section 402(g) per-individual limit)