TT is calculating the WRONG amount for the max 401(k) contribution. What's going on?

[JimmeMcVid]

I have W2 and 1099 income. 

For W2, I contributed $9K to my employer's 401(k) plan. 

So, I want TT to calculate the max I contribute to my self-employment (1099 income) solo 401(k) plan. The TOTAL (W2 job + 1099 job) max should be $19,500, right? 

But I check the box to have TT calculate the max 401(k) for my self-employment business and it says $28K. 

What is going on???  I'm guessing the correct figure should be $19,500 - $9K (for the W2 job). So, $10,500.  

Does TT have a bug? 

(Curious where I can find the worksheet where TT is doing this crazy math)

[SweetieJean]

See:

One Participant 401k Plans | Internal Revenue Service (irs.gov)

The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both:

• Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit:
  • $19,500 in 2020 and 2021, or $26,000 in 2020and 2021 if age 50 or over; plus
• Employer nonelective contributions up to:
  • 25% of compensation as defined by the plan. 
•  

[JimmeMcVid]

Ok, thank you for the reply. 

So the extra money beyond the $19,500 total must be what TT is calculating for the 25% of compensation that can be contributed as an option. 

Where does TT show the calculations for the 401(k) allotment so I can check its work and see what exact amount I need to contribute to each part of the 401(k)? 

In my case: 

W2 company plan has 401(k). I contributed $9K

1099 self-employment business therefore has $10500 left for elective deferral

BUT, I can also contribute up to 25% of compensation for employer nonelective contribution. 

When I click calculate MAX, TT says the total I can contribute for self-employment 401(k) is $28K.  So I need to know what exact amount is elective deferral and what amount is for that 25% (employer nonelective contribution). 

Thanks for any help. 

[JimmeMcVid]

It's still very strange. 

After I click MAX 401(k) contributions, TT shows me a screen where it says $0 can go to the individual 401(k) but the maximum allowed to qualified plans is $28,821. 

I only said I was contributing to my individual 401(k) not any other plans. 

[dmertz]

TurboTax is incapable of calculating the maximum permissible elective deferral to a self-employed 401(k) when you have made elective deferrals or Roth contributions to another employers qualified retirement plan in the same year.  You must not mark the Maximize box and instead calculate the amount of the elective deferral limit that remains, explicitly enter that value as your elective deferral, then use the Maximize function for a SEP contribution or a Keogh Profit Sharing contribution to calculate the maximum permissible employer contribution.

[JimmeMcVid]

Ok, I will try that. 

TT should really fix that feature. How hard can it be to ask -- you don't even have to ask; it's on the W2! -- what you already contributed to your employer's 401(k) plan??

[MyBrainIsTaxed]

Stumbled across this thread for the exact same reason. If TT isn't going to support the calculation, so be it (although like you said — it wouldn't be hard).

But then caution people not to use the Maximize button.

*OR* throw up an error if there's a W-2 Box 12 Code D value anywhere.

Sheesh.