How to complete form 8881 for automatic participation feature tax credit?

[gpientka]

I am a sole proprietor with no employees and opened a solo 401K in 2023. I would like to file for the automatic participation feature tax credit ($1500 over 3 years). When I access the section for form 8881 it refers to Startup Costs. I am not trying to file for the Startup Costs tax credit as I don't have employees, just the automatic participation feature tax credit. Am I able to do this in TurboTax Premier Online?

[DaveF1006]

 It is a startup cost for setting up retirement plans for employees. You qualify to claim this credit if:

• You had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year;
• You had at least one plan participant who was a non-highly compensated employee (NHCE); and
• In the three tax years before the first year you’re eligible for the credit, your employees weren’t substantially the same employees who received contributions or accrued benefits in another plan sponsored by you, a member of a controlled group that includes you, or a predecessor of either.

if you are a sole proprietor with no employees and prepare a Schedule c return ,you are not eligible for this credit. Please refer to this IRS link for more details. This is the same credit that you described as a automatic participation feature tax credit and is about startup costs.

[gpientka]

I was clear in my original question that I am NOT trying to take the startup cost credit in part I. I want to take only the Small Employer Auto-Enrollment Credit in part II. Turbotax premium online will not allow me to complete form 8881 Part II only. The IRA instructions for part II are clear that an eligible employer is different than for Part I. I do meet the criteria for part II. If I can't take this credit in TurboTax premium online I will have to complete my return and file elsewhere. Please advise.

[T2019T]

I would also appreciate an answer to this question. I have a solo 401k and am trying to claim the $500 auto-enrollment credit in Part II (NOT the startup costs credit in Part I). I have Turbotax Home & Business.

[jfoote2]

I have the same issue. I spoke with someone at turbotax and they said that it is not possible to fill out part 2 of the form 8881. 

[T2019T]

Do you know if the form (Part II) can be overridden/manually filled in?

[jfoote2]

I asked this question and it seems that it is impossible (which I'm skeptical of).  

[rxman921]

When will this be fixed to allow claiming the credit under "Part II. Small Employer Auto-Enrollment Credit"?

[coop00]

Waiting on this to be fixed!

[RobertB4444]

You will need the TurboTax desktop program to take the part 2 credit without taking part 1.  That functionality isn't in the online version.

Here's how to switch to the desktop program from the online program.

@gpientka 

@rxman921 

@T2019T 

@jfoote2 

@coop00 

[akchandran]

I have the desktop, home and business edition. It is still forcing me to enter a value in Part 1 of the 8881. I only want to fill in the part II. My return is getting rejected without an amount in Part 1. This is a bug and needs to be fixed in the desktop version as well.

[coop00]

I clicked the link to find out how to switch from online to desktop. Do I need to purchase desktop? I already purchased the online version so I shouldn't need to buy Turbotax twice.

Did you see the last comment from akchandran, who says that they still can't enter Part 2 of 8881?

Is it possible to file by mail and include form 8881 manually? If so then the Turbotax final numbers won't be correct.

[DEREK67]

I WOULD LIKE A RESPONSE TO THE ORIGINAL QUESTION. MY TAX RETURN WAS REJECTED. 

[lac528]

Can someone from Intuit please address this issue of claiming the auto-enrollment credit for a sole proprietor Solo 401(k)?

Numerous people need a solution to this. There are people having their tax filing rejected because of it. And not one but two threads on the subject - this one and one other one - have dead-ended for weeks or months.

See the other thread on this topic here:

https://ttlc.intuit.com/community/business-taxes/discussion/how-to-claim-small-employer-auto-enrollm...

And my post in that thread where I lay out the issue in detail here:

https://ttlc.intuit.com/community/business-taxes/discussion/re-how-to-claim-small-employer-auto-enro...

Can someone please revive these threads and provide some clear answers?

[LenaH]

Thank you for your patience, @lac528.  

In TurboTax Desktop, please follow the instructions below:

1. Open your Schedule C.
2. Open your business expenses.
3. Click Start next to All other expenses.
4. Enter your Pension Plan Startup Costs.
5. Answer the relevant questions.
6. Continue through the screens.
7. Answer all questions on the page, We need a little more information about your employee pension plan startup costs and answer Yes to the question, Was an auto-enrollment option provided for employees?
8. Answer the relevant questions.
9. Go to the Business Deductions and Credits area in the Business Items topic.
10. Select Other Business Credits on the next screen.
11. Click on Pension Plans - Startup Costs, Auto-Enrollment, and Military Spouse Participation Credits.
12. A credit will be reported on Form 3800, Part III, line 1dd.

You may need to manually update your TurboTax Desktop. To do so, please click here. 

If you have any other questions or concerns, please let us know and we can assist you further.