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Level 2

1099 and opening and contributing to non roth solo 401k

hello,

 

I have 1099-misc income. I know I can max out 401k (plus catchup)  with solo401k. I think, on top of IRS limit, i can contribute  20% of my 1099 income. So if I have 50k 1099 income and if i am above 50, I can put 26k my contribution, plus 10k as 20% income from employer to sole 401k, (total 36k) right? Which IRS form this employer contribution reported to? I didn't see it on sch C (may be I missed it..)

To open solo 401k do I have to have my onw EIN? or can I use my spouse solo 401k account (or spouse's EIN to setup my own solo 401k?), as we file taxes jointly?

Any idea when solo 401k account must be opened and contributed to, in order to be valid for 2020?

Thanks

 

S

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Level 15

1099 and opening and contributing to non roth solo 401k

Close, but not quite.  In this case, the maximum employer contribution would be 20% of net earnings.  Net earnings are net profit minus the deductible portion of self-employment taxes.  If you do not have a substantial amount of other income subject to social security taxes, the maximum employer contribution based on $50,000 of net profit would be $9,293 for a maximum total contribution of $35,293.

 

Assuming that neither spouse has any interest in the other spouse's business, each business must have it's own 401(k) plan and contributions would be based entirely on the income associated with that spouse's business.  Yes, you would need to obtain an EIN for the business and use that when establishing the solo 401(k).

 

The deadline for establishing a 401(k) plan used to be December 31 of the year for which contributions were to be made, but the SECURE Act changed that to be the filing deadline for the tax return for that year.  So, if you are a sole proprietor, you would have until April 15, 2021 to establish a 401(k) to receive contributions for 2020, or October 15, 2021 if you request a filing extension.

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Level 6

1099 and opening and contributing to non roth solo 401k

You really need to sit down with a local retirement  professional to get educated on this complicated matter ... getting investment advice from a nameless faceless public forum is not the best choice.  Your total situation needs to be discussed in full with someone you can trust.  

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Level 15

1099 and opening and contributing to non roth solo 401k

Close, but not quite.  In this case, the maximum employer contribution would be 20% of net earnings.  Net earnings are net profit minus the deductible portion of self-employment taxes.  If you do not have a substantial amount of other income subject to social security taxes, the maximum employer contribution based on $50,000 of net profit would be $9,293 for a maximum total contribution of $35,293.

 

Assuming that neither spouse has any interest in the other spouse's business, each business must have it's own 401(k) plan and contributions would be based entirely on the income associated with that spouse's business.  Yes, you would need to obtain an EIN for the business and use that when establishing the solo 401(k).

 

The deadline for establishing a 401(k) plan used to be December 31 of the year for which contributions were to be made, but the SECURE Act changed that to be the filing deadline for the tax return for that year.  So, if you are a sole proprietor, you would have until April 15, 2021 to establish a 401(k) to receive contributions for 2020, or October 15, 2021 if you request a filing extension.

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