Solo 401K Calculation Error

[Michael181818]

Currently I am using Turbotax Home and Business. In the business section > self-employed retirement. I have a solo 401K and I've entered the following:

Individual and Roth 401(k) plans

- Maximize Contribution to Individual 401(k) - YES

- Roth 401(k) elective deferrals = $23,500

Your Contributions

Enter the amounts that you contributed or will contribute to a Keogh, Traditional SEP, Roth SEP, Traditional SIMPLE or Roth SIMPLE Plan for 2025.

• I left this empty and clicked maximize to no.
• Prior years I have used an SEP IRA, but my understanding is since I have a solo 401K, I can do this as an employer contribution.

After I go through these screens it gives me

Retirement Contributions:

Here are your self-employed retirement deductions using the maximum allowable contribution.

Note: The maximum you can defer to all your 401(k) plans is $23,500, and you can put more into your plan as profit sharing.

Individual 401(k)	$0
Roth 401(k)	$23,500
Amount contributed	$23,500
Maximum allowed to qualified plans	$36,162
Amount to contribute by plan due date	$36,162
Employer match	$0

The $36,162 value is correct in terms of the formula (Net Income - 1/2 SE)*20%. I am unsure here why for employer match is noted $0, but when looking at this intially, I assumed the $36,162 is what it is telling me I can contribute. However, after I go through the person section it gives me the below. Looking at this, it seems to be thinking the roth contribution is deductible, subtracting my contribution from the $36,162. In the end the deduction amount seems right, but unclear why Turbotax framing it seemingly incorrectly.  I've tried to delete the Keogh, SEP, Simple Contribution worksheet, but it still gives me this same result.  

Keogh, SEP, SIMPLE and /or 401(k) Maximum	$0
Amount to be Contributed by Plan Due Date	$12,662
Total retirement contributions	$0
Amount deductible	$36,162

[AmyC]

Employer match is zero because as a sole proprietor, you are not matching your contributions. The employer match is for common-law employees. The employer match for employees, is a deductible business expense on Sch C. It is not deductible for the owner since the owner must put taxed income into the ROTH.

Both sections are actually agreeing. The top section shows your employee contribution and the total contribution.

The bottom section shows your employer contribution and the total.

Maybe this will help with understanding and next steps. You need to do the 1099-R next for $12,662.

Pre- tax dollars vs after tax dollars and how the income flows.

• Pre-tax traditional 401k: The employer contribution to the retirement plan is subtracted on Sch 1 under self-employed qualified plans. The employee contribution is reported on the same line 16 on Sch 1. Taxed as income later - when withdrawn.
• After tax ROTH 401k: The income must be taxed before it can be contributed. No deduction taken on Sch 1 so income is taxed and available funds to contribute to ROTH 401k. 1099-R is used to report the employer contribution to retirement plan, It is not taxed since rollover code G is used. You are taxed once on the income. 

ROTH 401K

To file the 1099-R (boxes not mentioned are left blank):

• Box 1 Enter total employer contribution
• Box 2a enter same as box 1
• Box 5 is blank
• Box 7 code G
• Not an IRA/SEP/SIMPLE -solo 401K is a qualified plan, not an IRA for this purpose.

Your employee contributions are not reported on your tax return since they are after tax dollars.

[dmertz]

No matter how the TurboTax developers have changed this particular page over at least the last 12 years, this page has never made any sense.  Internally, "Employer match" simply means the employer contribution.  The developers now seem to have not only confused the users with the inappropriate naming, they now seem to have confused themselves as well.

To determine the amount that is the permissible employer contribution, just subtract the elective deferral from the total permissible contribution.  Note that if you mark the Maximize box, TurboTax prepares your tax return under the assumption that you actually make the maximum permissible employee and employer contributions.

[Michael181818]

Hey Amy. Thanks for the reply. Not sure I'm understanding your note. To another user's comment in this thread, it does seem like TurboTax is confusing itself on definitions. Wording aside, if you look at what I noted, Turbotax is noting "Maximum allowed to qualified plans" is $36,162. I see they got this value on the Keogh, SEP, Simple Contribution worksheet, by using the formula (Net Income - 1/2 SE)*20%. This is what I know to be true when it comes to allowed employer contribution. So confused when I have $23,500 for roth, on later screens it notes $12,622 as the amount to be contributed. Roth is not deductible, so unclear what it's logic is.