I understand as a sole proprietorship, you can open an i401k to save for retirement. However when you tell TurboTax to "Maximize contributions", the amount it says to contribute by Plan Due Date looks like it is higher than the IRS allowed amount. This would be for an individual over the age of 50 making catch-up contributions.
Example screenshot attached.
Any reason for this anomaly or am I looking at it incorrectly?
Thanks.
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If your self-employed retirement plan is a one-participant 401k plan, you can contribute to the plan both as an individual and as an employer.
Take a look at the IRS information for One Participant 401k Plans – it gives a good explanation and some examples for a better explanation.
Taking a closer look at the screenshot you attached, you were able to tell TurboTax that $20K had already been contributed. However, based only on the screenshot, there was not an entry made to indicate that the employer match amount has already been contributed. Therefore, the bottom line is telling you that $37,904 needs to be contributed by the due date. Out of that $37,904, $20K is for the employer match and the other $17,904 is for the employee.If your self-employed retirement plan is a one-participant 401k plan, you can contribute to the plan both as an individual and as an employer.
Take a look at the IRS information for One Participant 401k Plans – it gives a good explanation and some examples for a better explanation.
Taking a closer look at the screenshot you attached, you were able to tell TurboTax that $20K had already been contributed. However, based only on the screenshot, there was not an entry made to indicate that the employer match amount has already been contributed. Therefore, the bottom line is telling you that $37,904 needs to be contributed by the due date. Out of that $37,904, $20K is for the employer match and the other $17,904 is for the employee.Still have questions?
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