Individual self-employment 401k (w/ profit sharing contribution) max option does not seem to adj for separate company 401k contributions unrelated to self-employment.

[Anonymous]

I worked in 2018 as self-employed for first part of year and then moved over to full time employment. Noticed that Turbotax for mac doesn't seem to take into account the company 401k contributions when trying to calculate the max contribution for an individual 401k that was used for self-employment. Am I missing something here, there's a bug or just need to adj something for this to correctly show in Turbotax.

[dmertz · Accepted solution]

You are correct.  The Maximize function for an individual 401(k) contribution does not account for elective deferrals or Roth contributions to other 401(k) plans.  You can select the Maximize function for a SEP or profit sharing plan to allow TurboTax to calculate the maximum employer contribution to the individual 401(k) and then explicitly enter the permissible amount of individual elective deferral or Roth contribution, taking into account those at your other employer.

[null204]

I've suggested to TurboTax that they correct this many times over the years. Now TurboTax won't let you electronically file returns with the adjustment made because they flag it as an error - even though it's correct. Great!

[mikep1300]

This problem still persists.  I relied on the maximize function for my new self-employed 401k, not realizing it didn't take into consideration the contributions made to a company 401k (even though those are designated by Code D on the W-2).  I now realize that TurboTax permits the deferral total to exceed the max ($22,500 for 2023).  So I now must amend my return (and pay more tax).   

To be fair, when you go to the fine print of TurboTax's Keogh, SEP and SIMPLE Worksheet, it says:  "Note: Maximum contribution calculations herein assume only one plan.  Multiple plan contributions: see Help."  But why can't that same warning show up in the step-by-step instructions, especially when the TurboTax coders should easily be able to make a connection between Code D on a W-2 and the Keogh, SEP calculation page.

[gbgtax]

Is this still a problem with the 2024 products? 

On a related note, today I spoke to a TurboTax expert on the phone and she said that if for year 2024 I contributed $30,500 ($23,000 + $7,500 over 50 catch-up) to ABC Company 401K and also contributed $30,500 to my Self-Employed 401k (even if not a profit sharing contribution) that it would be fine because together it is below the $76,500 maximum allowed to qualified plans.  I was surprised by this answer but she was insistent that this is correct.  Can anyone confirm or clarify this?  Based on this thread it doesn't seem correct.  Thank you.     

[dmertz]

2024 TurboTax is unchanged with respect to this.