Problems entering Solo 401(k) for myself and spouse

[jkoerber]

I am struggling with Turbotax and entering Solo 401(k) deductions for myself (self-employed owner) and my spouse (hired as a W-2 employee).  We are both over age 50.

Spouse was paid $30K of which $24K was elected deferral into her 401(k) account, net pay $6K.  Her W-2 was entered into TT as typical.

Questions:

1) Her election is shown in her W-2 entry, but to reduce my overall taxable income, I still need to show that i paid $24K for her in TT.  I put this under Business > Business Income and Expenses > Employee Expenses > Pension Plan.  I just created a line entry for this.  I couldn't find anywhere else to record the money I paid to her 401(k).  Is this the right place?

2) For my own personal $24K elective 401(k) contribution I put the entry on the Business > Business Income and Expenses > Less Common... > Self-Employed Retirement page as an elective deferral.  But I also see here a column for my spouses elections, although entering an amount here does not affect taxes?  I am confused how to use the column for my spouse.

3) For the Employer profit-share contribution, I am not sure at all how to handle this for myself or spouse.  If I check the box on the same screen as #2 above for myself, taxes are reduced, so it seems like it is calculating the maximum employer contribution for me.  But checking the box for my spouse does nothing?  Even entering a fixed amount does not change the tax due?

So with TT not changing the tax due depending on where i enter these values, I am confused on how this Individual and Roth 401(k) Plans screen works and where are the appropriate entries for my and my spouses elective and employer matching contributions.  This gives me little confidence I am putting these values in the right place and getting the tax deduction and 401(k) contributions I want.

[dmertz · Accepted solution]

1.  Yes, this is the correct place for the retirement contributions that you made for the benefit of your employees (you wife in this case).  You can include wife's elective deferrals on line 19 as long as you do not also include them on line 26; in this case line 26 would only include the amount in box 1 of your wife's W-2.

2.  The spouse's column would only be used if your spouse was also self-employed.  Since your wife is your employee, not self-employed, her retirement contributions do not go in the spouse's column next to your contributions.

3.  Checking the spouse's 401(k) Maximize box does nothing because your wife is not self-employed.

[jkoerber]

Followup Q's:   So on your response to #1 above, you mention line 19 and 26.  Where are these line numbers?  What form I guess is the question.  When I click the FORMS button on TT it takes me to a "Schedule C Worksheet Cont'd" page that has no line numbers, but is the spot that $24K payment for my spouses elective 401(k) deferall is entered.

Regarding my original #3 question.  I assume I need to determine the amount I am allowed to contribute for myself and my W-2 spouse as the employer match or profit-share distribution to the same 401(k) plans.  Mine looks like it is calculated in TT (although I do not know where the amount is and where I am supposed to confirm I actually paid this to the 401k ).  I do not know where I calculate or enter the employer profit share contribution for my spouse.  Maybe it is in the same form as #1 above, just a second line declaring the employer match contribution under her employee contribution?  Would that be the correct place?

Sorry if this is convoluted and confusing.

[dmertz]

Those are line numbers on Schedule C itself, the form being populated with your business-expense entries.

Clicking the Maximize button for yourself will cause TurboTax to calculate your maximum deduction.  The maximum deduction for yourself will be determined by first maximizing your elective deferral, then determining your employer contribution, then your catch-up.  The corresponding maximum profit-sharing contribution for your wife will be 25% of her compensation (generally the amount in box 5 of her W-2).  See IRS Pub 560, Chapter 4:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p560.pdf">https://www.irs.gov/pub/irs-pdf/p560.pdf</a>

[mshap]

I am struggling with the similar issue. Where should the spouse profit sharing under Solo 401(k) be listed in TurboTax and tax return?