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jamesaaustin
New Member

My spouse & I each contribute $18K employer retirement plans, & we have self-employment income from solo consulting firms. What's the max we can contribute to solo 401Ks?

Employer plans are 401K (spouse) and 403b (me). Consulting businesses are separate. Haven't yet set up the solo 401Ks. Recommendations on which plan to use? 

3 Replies
Zbucklyo
Level 9

My spouse & I each contribute $18K employer retirement plans, & we have self-employment income from solo consulting firms. What's the max we can contribute to solo 401Ks?

Under most circumstances, you will be able to contribute the employer portion of the solo 401 (k) - roughly 18.6% of your net profit from self-employment.  You will be unable to make an employee elective referral if you've already maxed that out on your W-2 income.  This is the same amount you'd be able to contribute under a SEP-IRA.

dmertz
Level 15

My spouse & I each contribute $18K employer retirement plans, & we have self-employment income from solo consulting firms. What's the max we can contribute to solo 401Ks?

When calculating the maximum permissible 401(k) contribution, TurboTax is unable to take into account your elective deferrals to the other plans.  The way to allow TurboTax to calculate your maximum solo 401(k) employer profit-sharing contribution would be to tell TurboTax to calculate the maximum SEP contribution rather than the maximum 401(k) contribution, even if you actually make the employer contributions to solo 401(k) plans.  Alternatively, you can tell TurboTax to calculate the maximum Profit Sharing Keogh contribution; the calculation is the same as for a SEP contribution.
dmertz
Level 15

My spouse & I each contribute $18K employer retirement plans, & we have self-employment income from solo consulting firms. What's the max we can contribute to solo 401Ks?

Given that you haven't set up any solo 401(k) plans yet, it would be simpler to set up SEP plans instead.  You have only until December 31, 2017 to set up a solo 401(k) plan to receive contributions for 2017 while you have until the due date of your tax return to set up a SEP plan.  If you plan on continuing to max out your W-2 employer plans in future years, there is little point to setting up solo 401(k) plans in favor of SEP plans.  However, if for some reason you would rather contribute elective deferrals or Roth contributions to your solo 401(k) plans (I can't think of any reason except if your W-2 employer plans don't offer a Roth option to which you would rather contribute, or you are making nondeductible contributions to traditional IRAs), you might want to set up the solo 401(k) plans instead.  Keep in mind that solo 401(k) plans have annual reporting requirements once the year-end FMV reaches $250,000.
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