Author Topic: Question about solo 401k  (Read 445 times)

fiveoh

  • Bristles
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Question about solo 401k
« on: May 02, 2018, 09:45:51 AM »
How does the solo 401k work for pre tax contributions on the employee contribution side?  The account setup says I contribute via salary deferrals.   I don't really pay myself a "salary", I just take distributions on a regular basis.  Can I still use this?  Would I just send them money every month and call it that?  I mainly want to contribute this way to lower my income for the child tax credit. 

Much Fishing to Do

  • Bristles
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Re: Question about solo 401k
« Reply #1 on: May 02, 2018, 12:11:39 PM »
There are basically two ways to figure 401k employee/employer contribution limits, one for proprietorship/llc (where you don't pay yourself a salary) and then one for something like a S Corp (where you do).

In your case the calculation is a little more complicated as far as the limit goes for the employer side (here is a calculator I like that shows both), but once you know what your limits are actually making the contributions for both sides are simple. 

I use Vanguard Small Business for mine and every quarter I figure what I can contribute and enter the transaction and Vanguard deducts it straight from my business checking account for both employer and employee sides. If you were paying yourself a salary (e.g. if you elected to file as an S COrp) then you;d have to factor this into your W-2 to yourself, etc.  But as a straight pass thru like a sole prop or LLC its just as simple as buying the investments within your solo 401k (designating which are employee and which are employer).

http://www.bcmadvisors.com/solo-401k-calculator





fiveoh

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Re: Question about solo 401k
« Reply #2 on: May 02, 2018, 01:29:01 PM »
There are basically two ways to figure 401k employee/employer contribution limits, one for proprietorship/llc (where you don't pay yourself a salary) and then one for something like a S Corp (where you do).

In your case the calculation is a little more complicated as far as the limit goes for the employer side (here is a calculator I like that shows both), but once you know what your limits are actually making the contributions for both sides are simple. 

I use Vanguard Small Business for mine and every quarter I figure what I can contribute and enter the transaction and Vanguard deducts it straight from my business checking account for both employer and employee sides. If you were paying yourself a salary (e.g. if you elected to file as an S COrp) then you;d have to factor this into your W-2 to yourself, etc.  But as a straight pass thru like a sole prop or LLC its just as simple as buying the investments within your solo 401k (designating which are employee and which are employer).

http://www.bcmadvisors.com/solo-401k-calculator

Thanks Strick!  You answered all my questions.
« Last Edit: May 02, 2018, 01:36:21 PM by fiveoh »