I have a solo 401k plan that allows after-tax contributions. I also have a W-2 job where I maxed out my elective deferrals and my social security taxes. I know this is an unsupported calculation for TurboTax so I was trying to calculate the employer profit sharing contribution and the after-tax contribution on my own.
Here are the amounts I came up with are:
Net Profit - $8,449
SE Tax (1/2) - $113
Pre-profit Sharing Deduction Compensation - $8,336
Compensation - $6,669
Employer Profit Sharing - $1,667
After Tax Contribution - $5,002
However, I talked to the solo 401k provider and they said I need to use the SE Tax amount that includes social security taxes (even if I'm not going to be paying that amount) when performing the calculations. Otherwise, self-employed persons with w-2 jobs will be treated more favorably than self-employed persons without w-2 jobs. The above amounts would risk an excess contribution.
If I took into account the SE tax with full social security taxes, here's what my calculations come up with.
Net Profit - $8,449
SE Tax (1/2) - $597
Pre-profit Sharing Deduction Compensation - $7,852
Compensation - $6,282
Employer Profit Sharing - $1,570
After Tax Contribution - $4,711(Compensation - Profit Sharing) or is it $6282 (100% Compensation)?
Does anyone have any experience with this situation and know which is the correct calculation? Appreciate any guidance.
Thank you!
