IRA and Solo 401k Contributions

[mrtk31]

All of my earned income is 1099 and I don't want to get in trouble by contributing more than I am allowed.

if the number is $16,000 that turbotax says my maximum contribution to a solo 401k plan, and I have contributed $6,000 already to a Roth IRA (which comes first in my retirement strategy), then that means I would only have $10,000 possible contribution to my solo 401k plan without getting into trouble?

[mrtk31]

or maybe the roth ira contribution limit is based on my total earned 1099 income?

and my solo 401k contribution limit is based on my Schedule 1, Line 3 less self-employment tax deduction which is on Line 15 of Schedule 1 ?

or maybe they are both based on the same number?

And wow this is confusing

I just wish I knew how much I can contribute without getting into trouble

[mrtk31]

was on the phone last night with 3 different intuit tax specialists and none of them could answer this for me

[DanaB27]

No, if you have enough taxable compensation from your self-employment then you can contribute the $6,000 to an IRA in addition to the solo 401k contribution. Contributions to a 401k and contributions to an IRA are two different things. Each has its own contribution limits.

For 2021 the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $6,000 ($7,000 if you're age 50 or older), or
• If less, your taxable compensation for the year (IRS)

Since you are self-employed your taxable compensation is your net profit reduced by the deduction allowed for one-half of your self-employment taxes and Self-employed SEP, SIMPLE, and qualified plans (Line 3 of Schedule 1 minus line 15 and 16 of Schedule 1).

To preview Form 1040 and Schedule 1:

1. Click on "Tax Tools" in the left menu
2. Click "Tools"
3. Click "View Tax Summary" in the Tool Center window
4. Click on "Preview my 1040" on the left

[Edited 2/16/2022 | 9:00am PST]

@mrtk31 

[mrtk31]

ok thank you for helping!

I only have 1099 gig worker income.

my question is specifically can my solo 401k contribution + roth ira contrubtion > schedule c net profit earned income?

which sounds kind of weird because how can I contribute more than my earned income.

but you are saying no problem at all so I guess I should stop worrying

[mrtk31]

I'm sorry I still don't understand how the IRS lets me contribute to both my roth solo 401k and my roth ira (added together) which ends up being an amount that is GREATER THAN my earned income.

[KrisD15]

Yes.

The solo 401(k) and a Roth IRA are two separate instruments and in your case you can contribute to both. 

Yes, the Solo 401(k) is limited to your Self-Employment income.

Yes, the requirement for a Roth IRA contribution is that you have compensation for that year. 

Although you are contributing the Self-Employment income to a Solo 401(k), that does not make the compensation ineligible for making the Roth IRA contribution. 

You may do both within each of their individual limits. The limits are not combined. 

[Edited 2/17/22 I 12:25pm PST]

https://ttlc.intuit.com/community/self-employed/help/how-do-i-enter-a-solo-401-k-in-turbotax/00/2483...

[mrtk31]

nothing you just said had anything to do with what I am asking.

I am asking about roth ira and roth solo 401k you are just talking about roth solo 401k please read my question 

[mrtk31]

this is painful dealing with you people, like nobody knows how to read on this forum

[KrisD15]

Yes, you are correct. 

The solo 401(k) and a Roth IRA are two separate instruments and in your case you can contribute to both. 

Yes, the Solo 401(k) is limited to your Self-Employment income.

Yes, the requirement for a Roth IRA contribution is that you have compensation for that year. 

Although you are contributing the Self-Employment income to a Solo 401(k), that does not make the compensation ineligible for making the Roth IRA contribution. 

You may do both within each of their individual limits. The limits are not combined. 

[Edited 2/17/22 I 12:25pm PST]

https://ttlc.intuit.com/community/self-employed/help/how-do-i-enter-a-solo-401-k-in-turbotax/00/2483...

[mrtk31]

I will have to edit my reply as I see you actually did take the time to respond taking into account what I said.

Okay so you are saying plainly and simply that I can contribute to my retirement accounts more than the actual earned income that I have.

Or am I missing something?

[MaryK4 · Accepted solution]

You apply the rules for the ROTH IRA and the Solo 401(k) sequentially and not simultaneously so as KrisD explained, it is possible to contribute more than your actual compensation.  @mrtk31

[mrtk31]

should we remove all of the replies from the "experts" telling me "NO"?

we don't want readers of this getting confused by the incorrect answers given by all the "experts"

[HEW1]

My financial advisor agrees that you can contribute to a Solo 401K and Roth IRA, but I followed the link and the TurboTax program continues to indicate that I have excess contributions when I add a Roth IRA contribution to the Solo 401K contribution, and essentially deducts the Roth IRA contribution amount from the Solo 401K contribution and, accordingly, increases my tax liability.  So I understand they are independent events with separate limits, but how do I make this work in TurboTax?  

[tle0880]

@KrisD15 & @MaryK4 , do either of you have references for your answer so I can review?  I was told we can't contribute to our ROTH IRA if we've already maximized on our solo401K contribution by a solo401K administrator.  I would like to  review the reference so I can understand it better & maybe communicate with the solo401K administrator again with that reference.

Thanks.