Author Topic: Fidelity Profit Sharing Keogh/Solo 401k distinction  (Read 362 times)

mountainfamily

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Fidelity Profit Sharing Keogh/Solo 401k distinction
« on: April 12, 2021, 09:15:47 PM »
Hello!

I have always done my own taxes, since they've gotten gradually more interesting every year and I enjoy researching it. This year I"m wondering if I should have hired a CPA. I live in a very expensive city so I'm afraid to think about how much it would cost... I'm stumped with a bit of a specific question, so if anyone has the knowledge to answer it, thanks in advance. (I think I can also pay Turbo Tax extra to get answers from a CPA.)

I am self-employed and make about $50k per year. I opened a solo 401k with Fidelity. My spouse is a higher earner than me, so one of the functions of my 401k is to reduce our taxable income by dumping as much money into it as possible. I was hoping to contribute the maximum $19,500 to it, which would basically wipe out our tax bill. However, according to fidelity the "account is technically a Profit Sharing Keogh with a 401(k) feature that allows you to make an elective salary deferral contribution to the account. However, the account is considered a Self-Employed 401(k) and is labeled as a Self-Employed 401(k) account on your account statements." When I check the "Keogh profit sharing box" on Turbo Tax, it says I can only contribute 25% of my income, or about $8000. If I select "Individual 401k elective deferrals" Turbo Tax allows $19,500.

Does anyone know how to answer this very specific question?

bacchi

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Re: Fidelity Profit Sharing Keogh/Solo 401k distinction
« Reply #1 on: April 12, 2021, 09:45:52 PM »
When I had a solo 401k at Fidelity, I always assumed the "Keogh" title was a legacy product that Fidelity adapted to the solo 401k.

I always treated it as a solo 401k and made the full employEE contribution (now $19.5k) + the 20% employER contribution.

mountainfamily

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Re: Fidelity Profit Sharing Keogh/Solo 401k distinction
« Reply #2 on: April 12, 2021, 09:50:13 PM »
Thank you, that makes sense. That is the assumption I'm making, too, based on the wording of my email from the Fidelity rep. The 19.5k contribution will make a big difference in our tax bill. However, I am going to go into the Fidelity branch to give them a check (I live nearby) so I will ask them there too.