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Returning Member
posted Dec 12, 2020 3:51:38 PM

Does self emplyd tax prgm account for the proper amount to deduct for the 401k employer contribution in a self emplyd account, specifically if 401k exceeds 25% of income?

This is for an individual 401(k) Plan.   Need to calculate what my max contribution can be. This is the employer contribution which is a normal IRA contribution. My employee contribution is actually into a Roth i401k.

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4 Replies
Level 15
Dec 12, 2020 6:06:29 PM

2020 TurboTax's calculations on the Keogh, SEP and SIMPLE Contribution Worksheet have not yet been updated for the 2020 employee regular and catch-up contribution limits, so 2020 TurboTax's calculation of the maximum employer contribution might also be incorrect as a result.  Once 2020 TurboTax has been updated to have the correct employee contribution limit, TurboTax will properly calculate the employer contribution as well as the maximum employee contribution.

 

Your maximum employer contribution will depend on your net profit, which for many is not known until year-end, so you probably won't need to know the maximum employer contribution until at least January anyway unless you are simply trying to make the contribution as early as possible because you anticipate gains in the market between now and then.

 

Also, the limit you are referring to for a self-employed individual is 20% of net earnings, not 25%.  Net earnings are your net profit minus the deductible portion of self-employment taxes.  There is also a different, lower limit (half of what remains of net earnings after subtracting your regular, but not catch-up, employee contributions) that might apply depending on your net profit, taken into account on TurboTax's worksheet.

Returning Member
Jan 3, 2021 5:28:08 PM

Thanks for clarifying.  Appreciate it, 

Level 2
Apr 17, 2021 5:46:38 PM

@dmertz  Wondering if you can help with a problem I'm having. I'm self-employed and have input Employee and Employer contributions for a Solo 401k. However, only the Employee contributions are being deducted from my income. The Employer contributions are not being deducted - they are having no effect on my taxes owed. Could there be a problem with the online software? Any suggestions for getting the Employer contributions to sync with Schedule C and be deducted?

Level 15
Apr 19, 2021 2:34:35 PM

If the employer portion is not appearing on Schedule 1 line 15, apparently your net earnings are insufficient to support an employer contribution.  Examine the Keogh, SEP and SIMPLE Contribution Worksheet to see the calculation.