The "Amount to Contribute by Plan Due Date" in Turbotax 2017 appears higher than IRS allowed amount.

[lharr57]

I understand as a sole proprietorship, you can open an i401k to save for retirement.  However when you tell TurboTax to "Maximize contributions", the amount it says to contribute by Plan Due Date looks like it is higher than the IRS allowed amount.  This would be for an individual over the age of 50 making catch-up contributions.

Example screenshot attached.

Any reason for this anomaly or am I looking at it incorrectly?

Thanks.

[AnnetteB · Accepted solution]

If your self-employed retirement plan is a one-participant 401k plan, you can contribute to the plan both as an individual and as an employer. 

Take a look at the IRS information for One Participant 401k Plans – it gives a good explanation and some examples for a better explanation.

Taking a closer look at the screenshot you attached, you were able to tell TurboTax that $20K had already been contributed.  However, based only on the screenshot, there was not an entry made to indicate that the employer match amount has already been contributed.  Therefore, the bottom line is telling you that $37,904 needs to be contributed by the due date.  Out of that $37,904, $20K is for the employer match and the other $17,904 is for the employee.

[edited 3/6/18 | 10:55 am PST]

[lharr57]

Hi, thanks for the response.  I understand what the maximum amount is both as an individual and an employer.  My question/concern is how TurboTax is calculating the "Amount to Contribute by Plan Due Date".  In my example the employee has contributed $20K and an employer match of $20K was made.  This brings the total to $40K.  The "Maximum Allowed to Qualified Plans" is $37,904.   If you subtract $40K from the $57, 904. then shouldn't the "Amount to Contribute..."  be $17,904?  Yet TurboTax says $37,904.

[AnnetteB]

The way I interpret the information on the page you attached is the following.  You were able to tell TurboTax that $20K had already been contributed.  However, based only on the screenshot, there was not an entry made to indicate that the employer match amount has already been contributed.  Therefore, the bottom line is telling you that $37,904 needs to be contributed by the due date.  Out of that $37,904, $20K is for the employer match and the other $17,904 is for the employee.

[lharr57]

Ahhh got it!  Thank you so much for that explanation.  Perhaps they could have worded that a little better.  

You wouldn't happen to know how I can convert your comment (2nd response to my question) as the answer, would you?  Thanks again.

[AnnetteB]

I edited the answer to put the explanation in for additional information.

[mrakeshm]

Follow on question for me - why is "Amount to be Contributed by Plan Due Date" Red?  Do I need to take that amount back? This case seems to be like this.  (Numbers only example, actual number are different) 1) Net Income : $80 ;  2) Contribution $100.  So it says "Amount to be Contributed by Plan Due Date" = -$20.   What do I need to do? Take that money back from 401k?