Turbo Tax Error, Solo single participant 401K is $61000, not $19500

[Kmorckel241]

I cannot transmit my return because Turbo Tax Home & Business incorrectly identifies my Solo 401K contribution ($61,000 limit) as an Individual 401K ($19,500 limit).  I printed out my return and had a CPA review it and the CPA  advised it is correct, however, I cannot transmit/file my return because Turbo Tax Home & Business keeps giving me an error referencing I have over contributed to an Individual 401K, whereas I contributed to a Solo 401K.  Could I please talk to a real person?????

[BillM223]

We in the Community obviously cannot see your screen nor your private tax data, but my guess is that you did not enter your data under Solo 401k.

Please go and delete whatever 401(k) data you have already entered, and do the following:

Do a Search (upper right) for solo 401k and click on the jump-to link (Mac users must find solo 401k in the Topics List). Just type solo 401k and hit Enter; ignore any of the suggested search terms.

As you probably know, you must be filing a Schedule C or F to have a solo 401(k), so make sure you enter the corresponding business data first.

If this does not work for you, come back and tell us.

[dmertz]

"Individual 401(k)" and "Solo 401(k)" are two names for the same thing.

The regular elective deferral limit for 2021 is $19,500.  If you were over age 50 by the end of 2021 you also have a catch-up contribution limit of $6,500.  The maximum permissible total of all additions (employee and employer contributions) to your Solo 401(k) for 2021 is $58,000 plus, if over age 50, the $6,500 catch-up.  Unless you simply use the Maximize function for an individual 401(k), you must enter the regular elective deferral, catch-up elective deferral and employer profit sharing contribution in separate entry boxes.  Note that your employer contribution cannot exceed 20% of your net earnings, figured on a maximum of $290,000 of net earnings.  Net earnings are net profit minus the deductible portion of self employment taxes.  To be able to contribute a total of $61,000 you would have to be over age 50 and have at least $186,350 of net profit from self employment.

[gn314]

I am going through the exact same issue.  Following the step by step instructions on a 401K, answering the Turbo Tax questions correctly, takes the user down the wrong path (and correcting is not an easy task).  It is very frustrating.  I went through a similar issue last year .... along with an underpayment penalty last year I should have paid which Turbo Tax did not properly calculate (which I got burned on from the IRS).  I actually went on the Turbo Tax website last year to call someone about the "guaranteed" calculations, but there is no way to reach out to someone at Turbo Tax - there is not a phone number anywhere.  Also, frustrating.  I thought twice about using Turbo Tax Home & Business this year - obviously I did, but now questioning that decision.

[davidV2V]

Same error tried typing in solo 401k and still get error

[BillM223]

Referring back to dmertz's answer:

1. Were you over age 50 by the end of 2021?

2. Did you use the Maximize function?

3. Or did you enter the regular elective deferral, catch-up elective deferral and employer profit sharing contribution in separate entry boxes?

4. Note that your employer contribution cannot exceed 20% of your net earnings, figured on a maximum of $290,000 of net earnings.  What was your employer contribution? NOTE: Net earnings are net profit minus the deductible portion of self employment taxes.  

5. 

@davidV2V

To submit a claim under TurboTax's100% Accurate Calculation Guarantee, you don't call a phone number but submit the claim in writing using the forms at this TurboTax website.

@gn314

[gn314]

Well, thanks for the info on claiming the miscalculation error last year, but the first thing one sees going to this URL is it must be claimed within 60 days .... I suspect you know, I am past that now.  So, you are off the hook-  and I already paid the interest fine that the miss calculation created.  The question begs, why do you not allow phone calls?

Back to the other responses given to others on the 401K entries.  Your software only works smoothly if you check "take the maximum".  If you want to do something less than maximum, it does not handle this correctly - period.  It also does not calculate, or enable 401K catch up contributions to be entered or considered.  If one knows how to do it, you can get it right going directly to the forms in Turbo Tax, but your step by step software does not work correctly unless one checks maximum.

[BillM223]

"The question begs, why do you not allow phone calls?" As you can see, this is where you make a claim on the guarantee. This requires certain required information, which is better handled on a form than in a conversation. Furthermore, we would need to have exact details, which are better handled in writing than over the phone. Certainly, our response to you is in writing (I trained in that section last year).

Thank you for the other comments; I am not as familiar with this as @dmertz is. What product were you using? And you were using the CD/download software right? I just want to make sure that you were not using an Online product, which in some cases works differently than the CD/download. dmertz, like most of us, uses the "desktop" (CD/download) software, so I am inclined to believe him when he says that you can enter these things separately in TurboTax.

However, when I see "It also does not calculate, or enable 401K catch up contributions to be entered or considered" I am concerned that what you are saying is that you never saw a question in the interview asking for 401(k) catch-up contributions. This can happen if the interview in the Online product is different than in the desktop product.

So, just to be clear, did you not see in the Interview questions asking for 

• regular elective deferral, 
• catch-up elective deferral and 
• employer profit sharing contribution ?

Thanks!

[gn314]

Given the crazy tax law changes from government and timing of those changes, I don’t know envy your challenge to keep up.  I am a long time, many year, loyal customer of Turbo Tax and just trying to help.  I want your software to work correctly.  Even with my TT challenge last year, I bought your software again this year. I want to depend on it like I previously did.  Your reply is somewhat disappointing. 

I will not share specifics of my tax return on this public forum, but I will tell you, I did purchase the disc, and I am using it with a PC on Windows 11.  I did go through the question process using the step by step and when it came out wrong, or stopped with an error warning, I deleted it and started over – I did that 3 times.  I finally went to the forms and manually did it – that worked and “passed the Turbo Tax review process”.

This is all the time I will spend trying to help.  Fix it, don’t fix it, whatever … but, you need to try various scenarios on the 401K entries to see what works and what does not.  You are letting me hang from last year, and your lack of attention in this matter is disappointing.  Again, I have spent more time on this than I should have and this will be my last entry.

[vitaar]

@gn314 

You wrote "If one knows how to do it, you can get it right going directly to the forms in Turbo Tax."

How do I fix the forms myself after TT has done their pass?

I am having the same problem. TT Home and business is telling me I have to withdraw over contributed money when I am not anywhere close to the IRS limits published by IRS.