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janecui11
New Member

Individual 401k

I work for a company. My company does not have a 401k.

I am also a self-employed sole proprietor (LLC)

I made $15,000 this year from my self-employment.

I contributed $15,000 to my individual 401K

I got Turbotax Self-employed 2016

I went to Business > Less Common Business Situations > Self-employed Retirement

I clicked on the button "Maximize Contribution to Individual 401(k)"

But adding i401k contributions did not lower my taxes at all.

Can anyone explain why this is happening?
1 Best answer

Accepted Solutions
Opus 17
Level 15

Individual 401k

Mostly answered in comments.

Most forms and calculations are hidden using Turbotax Online.  If you really want to see forms and calculation, you need to use turbotax home & business version installed on your own mac or PC.  You can see some numbers including the 1040 by going to My Account, Account Tools, Tax Summary, Preview my 1040.

Many credits and calculations will give wrong answers if you do them out of order.  Once you add all your income, W-2, etc. then everything gets recalculated.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

6 Replies
VolvoGirl
Level 15

Individual 401k

For self employment it will lower your regular income tax but not any self employment tax.  And you can't put the full amount of your  Net Profit into the 401k.  You can contribute to a 401k up to the amount of your Net Profit reduced by 1/2 of the SE tax OR
to the max contribution allowed for a 401k whichever is Less.
TaxGuyBill
Level 9

Individual 401k

What is showing up on Line 28 of your Form 1040?

I *THINK* you need to enter it differently if you contribute that much (I think the 'maximize' option just does the employer part, not the employee elective deferral part).  @dmertz  can probably guide you with that.

As VolvoGirl pointed out, if your profit was $15,000, you can't contribute the full $15,000.  You need to compensated for the 1/2 SE tax adjustment.
dmertz
Level 15

Individual 401k

As long as no elective deferrals were made to another retirement plan, the Maximize function for an individual 401(k) will work fine.  Otherwise, TurboTax's Maximize function will calculate a deduction in excess of that allowed, not the proper reduced amount, but that's not the concern here.
janecui11
New Member

Individual 401k

Thank you so much! This was really helpful.

I'll adjust the Contribution. The reason my tax didn't get lower was because I didn't put any W2 income into Turbotax, since I haven't received the W2 form yet.

I don't know how to see the line 28 of Form 1040. What button do i have to press to see it? I just started using Turbotax self employed.
dmertz
Level 15

Individual 401k

I assume then that taxes weren't reduced because, due to the lack of the W-2 entry, the calculated income tax was already zero and you were seeing only the self-employment tax as your tax liability.
Opus 17
Level 15

Individual 401k

Mostly answered in comments.

Most forms and calculations are hidden using Turbotax Online.  If you really want to see forms and calculation, you need to use turbotax home & business version installed on your own mac or PC.  You can see some numbers including the 1040 by going to My Account, Account Tools, Tax Summary, Preview my 1040.

Many credits and calculations will give wrong answers if you do them out of order.  Once you add all your income, W-2, etc. then everything gets recalculated.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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