Solo 401k contribution

[zodydandy]

I am a sole proprietor and having trouble with solo 401k contributions.  My wife and I each contributed $19,000 (she receives a 1099 from my business).  When I enter these 401k contributions into the "self employed retirement" page there is no change in my federal taxes owed.  This $38,000 total is also not reflected when looking at our net income under Business Income and Expenses (Sch C).  Am I doing something wrong or is there a glitch?  

[AlexanderS08]

The amounts you can contribute are limited by the amount of business income earned.  Is it possible you did not earn enough for you to contribute the full $38,000?

Did TurboTax allow a partial deduction? If so, this could be what is happening. In that scenario, you have until April 15, 2020 to withdraw any "excess" that you contributed without consequence. 

[zodydandy]

As far as I can tell the business earned enough for this.  I earned around $44,000 and my wife earned $22,500.  From what I can gather, you can contribute up to 100% of your earned income.  Any other thoughts?

[AlexanderS08]

I am not sure what the split on employer paid versus self-contributed, but the maximum that can be contributed by the employer (thus the max that can be deducted on the business side) is 25% of total participant compensation. 

In your scenario the compensation is $67,000 roughly so the MOST the business could deduct is in the $17,000 range.  Does it seem like TurboTax is deducting about that much from the business?

[zodydandy]

Thanks for helping us try to figure this out! We only contributed as the participant (not employer). We were encouraged to do this by a tax adviser last year, but this is the first year we've made such a contribution. According to the IRS website, it should be acceptable:

https://www.irs.gov/retirement-plans/one-participant-401k-plans

Also, no matter what amount we put in as our contribution (be is $500 or $50,000), the federal tax due amount never changes. The state does, but not federal. Thoughts?

[dmertz]

A self-employed retirement contribution is not a business deduction, it's a personal, above-the line deduction.  As such it should not be on either of your Schedules C but should instead appear combined on line 15 of Schedule 1.

Examine the Keogh, SEP and SIMPLE Contribution Worksheet to see the calculation of each of your self-employed retirement deductions.  (Of course if these contributions were to a designated Roth account in your solo 401(k) plan, there is no deduction.)  If you are using the online version of TurboTax you'll need to pay for TurboTax before you can download the pdf with all worksheets.

[zodydandy]

Thanks for this info!!! We ended up making an appointment with a local accountant who we'll just pay to file our taxes.

[Nomanation]

I am having this same issue and just posted separately. I know that I am allowed to contribute to my 401k but when I input my contribution it does not affect my tax due amount. This leads me to believe turbo tax is not deducting my contribution from my business income.

did you ever find a solution? I too am worried I may have to ditch tt and get an accountant. I also believe turbo tax has been miscalculating this for the last few years and I have overpaid my taxes by several grand a year as a result. Would love to know if anyone found if this was a glitch.