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Adam-Z
New Member

401k on W2 - contributed some in 2018. Starting solo 401k in May - self employed now. 51 yo. Are IRS limits separate or combined if 2 plans in 1 year?

Started LLC this year. Planning to start solo 401k. Need to figure max remaining contributions for the year. First 4 months on W2 and with employer sponsored 401k with approx 5k contrib and 3.k match. So far...

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2 Replies
dmertz
Level 15

401k on W2 - contributed some in 2018. Starting solo 401k in May - self employed now. 51 yo. Are IRS limits separate or combined if 2 plans in 1 year?

I assume that you have not applied to be treated as an S corporation and instead your LLC is treated as a disregarded entity and you will be reporting your business on Schedule C.

The elective deferral limit (for 2018, $18,500 plus, if over age 50, $6,000 catchup) is a per-individual limit.  Since you've already deferred about $5k to the first employer, you're maximum elective deferral to the solo 401(k) will be about $13,500 (or $19,500 if you are age 50 or over in 2018).  However, depending on your net profit from self-employment, you could be limited to less.  Your total contributions cannot exceed your net profit minus the deductible portion of self-employment taxes.

Employer contributions are governed by a separate per-plan limit, so the $3k of matching contribution made by your first employer has no effect on how much you can contribute to your solo 401(k).  If you have sufficient profit from self-employment, you'll be able to make an employer contribution to your solo 401(k).  The calculation is a bit complicated since it's governed by several limits.  The calculation is described in Chapter 5 of IRS Pub 560:

https://www.irs.gov/pub/irs-pdf/p560.pdf

You won't be able to use TurboTax's Maximize function for an individual 401(k) to do this calculation for you because this function in TurboTax doesn't take into account your elective deferral at your first employer.  Instead, you'll have to manually enter the elective deferral that you are eligible to make without exceeding the individual elective deferral limit, then use the Maximize function for a SEP contribution to allow TurboTax to calculate just the maximum employer contribution.  The maximum employer contribution for a SEP plan is the same as for a 401(k) plan.

Alex-A
New Member

401k on W2 - contributed some in 2018. Starting solo 401k in May - self employed now. 51 yo. Are IRS limits separate or combined if 2 plans in 1 year?

I was just given different advice from a turbo tax CPA. I was told that that for 2019, since I'm under 50, my maximum elected deferral/employee contribution to a 401k is 19,000 per employer, not per individual. So if I've contributed 19,000 under a job with w-2 income, I can still contribute 19,000 under a solo 401k with self employed income. Is that true? I think what you are saying is that I've maxed out my elective deferral but I can contribute to a solo 401k as my own employer and the limits of that contribution are based on my self employed income. Is that correct?

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