I'm 57 years old and I have 2 jobs. I work for company A and I contributed $11,500 to that 401(k). I also moonlight and earned an additional $30,000 net income and I'd like to put as much money as I can into my Self Employed 401(k), but I'm confused by the amounts the TT tells me I can contribute when I tell it to maximize my contributions.
The way I understand it, my total elective deferrals can't exceed $26,000. I've already contributed 11,500 to company A, so I choose 8000 elective deferral plus 6500 catch up contribution to my self employed 401k.
The profit sharing contribution is capped at 20% of 30,000 or 6000, making my total contribution to my self employed 401k 20,500 (8000 + 6500+6000).
If I choose Maximize contribution, TT just tells me I can defer a maximum of 23,332. Who's right?
You must subtract one-half of your self-employment tax from the profit sharing calculation, so it’s not $30,000 x 20%.
You can review the TurboTax calculation on the Keogh/SEP Wks.
I figured it out.
I assumed that TT looked at my W2 information to figure out my maximum contributions, but it doesn't. I have to enter the amount that I already contributed to Company A's 401k. Therefore, the total of my elective deferral should be 19500 and I have a 6500 catch up. Then TT tells me that the amount to contribute for my Employer Match is 1164.
TurboTax's Maximize function for an individual 401(k) doesn't take into account elective deferrals or Roth contributions you've made to another employer's plan, so you have to use a workaround. In the individual 401(k) section you can enter up to a $14,500 elective deferral or Roth 401(k) contribution, but to calculate the maximum employer contribution you'll have to use the Maximize function for a SEP contribution. The employer-contribution calculation is the same for both a SEP plan and an individual 401(k).
With $30,000 of net profit from self-employment, your maximum employer contribution to the individual 401(k) is $5,576. Adding the $14,500 of elective deferrals brings the total maximum contribution to your individual 401(k) to $20,076 (or slightly more if you max out the Social Security wage cap between your two jobs, but no more than $20,420).