RECORD A CONTRIBUTION/DEFERRAL
This form can be used to record a contribution to your Solo 401(k). This is an administrative form, so you simply keep it in your records to formalize any contributions you make. Contributions can be made to the plan in a lump sum or periodically throughout the year.
Things to consider:
Here is an overview of the deadlines for contributions to a Solo 401(k)
No matter what type of business entity you have, such as a sole proprietorship, LLC, Partnership or Corporation, or what type of contribution you’re making, the below sections will walk you through the deadlines.
The sections below are split up by entity type, so just click on the plus sign on the right-hand side of the box that describes your business entity, and it will expand down to reveal contribution limits and deadlines.
Sole Proprietorship
Employee Deferral
A sole proprietor can make an employee deferral contribution of up to $19,500 for 2020. The limit remains at $19,500 for 2021.
If you’re over 50 years old, you’re in luck because you’re given a “catch-up” contribution, which means your total employee deferral contribution limit is $26,000 for 2020. The limit remains at $26,000 for 2021.
If you’re a sole proprietor, you have to make a formal election to make employee deferral contributions by December 31, but the actual deadline is your personal tax-filing deadline of April 15. If you’re filing an extension, the deadline would be October 15.
Remember: your employee deferral contribution can be made to the pre-tax or “normal” side of the 401(k) plan, or to the after-tax or Roth side of the 401(k) plan. It doesn’t have to be all or nothing either; if you want to split the contributions between the pre-tax and after-tax sides of the plan, you can do that as well.
Profit Sharing Contribution
A sole proprietor can make an employer or profit-sharing contribution to the Solo 401(k) both for the business owner, and his or her spouse.
IRC 401(a)(3) governs employer contributions, and it dictates that a business entity can contribute up to 25% of the business’s income that is subject to self-employment tax. If you’re a Schedule C sole proprietor, your profit-sharing contribution is going to be based off of your earned income. There’s an additional calculation that effectively lowers the maximum contribution to 20% of your earned income; IRS Publication 560 has a step-by-step worksheet for the calculation.
This calculation takes into account a couple of deductions. The first is the deduction for half of your self-employment tax, and the second is a deduction for the contributions you’ve made to the Solo 401(k). In effect, this generally means that your profit-sharing contribution limit will be 20% of your net self-employment income.
Total Plan Contributions Limit
Total contributions for 2020 cannot exceed $57,000 if you're under 50 years old, or $63,500 if you're over 50 years old. In 2021, total contributions cannot exceed $58,000 if you're under 50 years old or $64,500 if you're over 50 years old.
A sole proprietor’s employer or profit-sharing contribution deadline is the same for the employee deferrals. It follows your personal tax-filing deadline of April 15, unless you file for an extension to October 15.
Single Member LLC
Employee Deferral
If you’re the sole member/owner of a LLC, you can make employee deferral contribution for 2020 of up to $19,500 to the 401(k) plan. The limit remains at $19,500 for 2021.
If you’re over 50 years old, you’re in luck because you’re given a “catch-up” contribution, which means your total employee deferral contribution limit is $26,000 for 2020. The limit remains at $26,000 for 2021.
You have to make a formal election to make employee deferral contributions by December 31, but the actual deadline is the LLC owner’s personal tax-filing deadline of April 15. If your filing an extension, the deadline would be October 15.
Remember: your employee deferral contribution can be made to the pre-tax or “normal” side of the 401(k) plan, or to the after-tax or Roth side of the 401(k) plan. It doesn’t have to be all or nothing either; if you want to split the contributions between the pre-tax and after-tax sides of the plan, you can do that as well.
Profit Sharing Contribution
A single-member/owner LLC make an employer or profit-sharing contribution to the Solo 401(k) both for the business owner, and his or her spouse.
IRC 401(a)(3) governs employer contributions, and it dictates that a business entity can contribute up to 25% of the business’s income that is subject to self-employment tax. Given that single-member/owner LLCs are not taxable entities, your profit-sharing contribution is going to be based off of your Schedule C earned income. There’s an additional calculation that effectively lowers the maximum contribution to 20% of your earned income; IRS Publication 560 has a step-by-step worksheet for the calculation.
This calculation takes into account a couple of deductions. The first is the deduction for half of your self-employment tax, and the second is a deduction for the contributions you’ve made to the Solo 401(k). In effect, this generally means that your profit-sharing contribution limit will be 20% of your net self-employment income.
Total Plan Contributions Limit
Total contributions for 2020 cannot exceed $57,000 if you're under 50 years old, or $63,500 if you're over 50 years old. In 2021, total contributions cannot exceed $58,000 if you're under 50 years old or $64,500 if you're over 50 years old.
A single-member/owner LLC’s employer or profit-sharing contribution deadline is the same for the employee deferrals. It follows the LLC owner’s personal tax-filing deadline of April 15, unless you file for an extension to October 15.
Multi-Member LLC
Employee Deferral
The partners of a multi-member LLC or Partnership can each make an employee deferral contribution of up to $19,500 for 2020. The limit remains at $19,500 for 2021.
If you’re over 50 years old, you’re in luck because you’re given a “catch-up” contribution, which means your total employee deferral contribution limit is $26,000 for 2020. The limit remains at $26,000 for 2021.
You have to make a formal election to make employee deferral contributions by December 31, but the actual deadline is the LLC’s or Partnership’s tax-filing deadline, which includes extensions.
Remember: your employee deferral contribution can be made to the pre-tax or “normal” side of the 401(k) plan, or to the after-tax or Roth side of the 401(k) plan. It doesn’t have to be all or nothing either; if you want to split the contributions between the pre-tax and after-tax sides of the plan, you can do that as well.
Profit Sharing Contribution
A multiple-member LLC or Partnership may make an employer or profit-sharing contribution to the Solo 401(k) both for the each of the partners or owners.
IRC 401(a)(3) governs employer contributions, and it dictates that a business entity can contribute up to 25% of the business’s income that is subject to self-employment tax. Given that single-member/owner LLCs are not taxable entities, your profit-sharing contribution is going to be based off of your Schedule C earned income. There’s an additional calculation that effectively lowers the maximum contribution to 20% of earned income; IRS Publication 560 has a step-by-step worksheet for the calculation.
This calculation takes into account a couple of deductions. The first is the deduction for half of your self-employment tax, and the second is a deduction for the contributions you’ve made to the Solo 401(k). In effect, this generally means that your profit-sharing contribution limit will be 20% of your net self-employment income as a partner of the LLC.
Total Plan Contributions Limit
Total contributions for 2020 cannot exceed $57,000 if you're under 50 years old, or $63,500 if you're over 50 years old. In 2021, total contributions cannot exceed $58,000 if you're under 50 years old or $64,500 if you're over 50 years old.
A multiple-member LLC or Partnership employer or profit-sharing contribution deadline is the same for the employee deferrals. It follows the entity’s tax-filing deadline, including extensions.
C-Corp, S-Corp, & LLCs taxed as S-Corp
Employee Deferral
If you have a corporation, then you need to do your employee salary deferral contributions through payroll. An employee under 50 years old, can make a deferral contribution of up to $19,500 for 2020. The limit remains at $19,500 for 2021.
An employee over 50 years old is given a “catch-up” contribution, which means their total employee deferral contribution limit is $26,000 in 2020. The limit remains at $26,000 for 2021.
An employee of a C-Corporation or S-Corporation can make an employee deferral by using a W-2 form, and that employee can make the contribution at any time during the year when the income to be contributed is earned.
If your Corporation uses a payroll company, generally you’ll need to have the contribution deducted from the employee’s paycheck. If you’re not using a payroll company then the employee can make the contribution anytime during the year that they wish.
Keep in mind that the Dept. of Labor safe harbor requirements stipulate that a deferral contribution has to be deposited within seven days from the date when the employee chose to make the contribution.
Remember: your employee deferral contribution can be made to the pre-tax or “normal” side of the 401(k) plan, or to the after-tax or Roth side of the 401(k) plan. It doesn’t have to be all or nothing either; if you want to split the contributions between the pre-tax and after-tax sides of the plan, you can do that as well.
Profit Sharing Contributions
A Corporation can make profit-sharing contributions for it’s owner(s)/employee(s). IRC 401(a)(3) governs employer contributions, and it stipulates that total employer contributions cannot exceed 25% of the compensation paid to the owner(s)/employee(s).
Total Plan Contributions Limit
Total contributions for 2020 cannot exceed $57,000 if you're under 50 years old, or $63,500 if you're over 50 years old. In 2021, total contributions cannot exceed $58,000 if you're under 50 years old or $64,500 if you're over 50 years old.
The filing deadline for employer or profit-sharing contributions for Corporations is the Corporation’s tax filing deadline, including extensions.