Author Topic: Solo 401k - Net Income Definition  (Read 879 times)

kenmoremmm

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Solo 401k - Net Income Definition
« on: November 05, 2018, 10:45:09 PM »
I suck at reading IRS pubs. Can someone give me the quick and dirty on Solo 401k's definition of net income? Is it basically gross income - work expenses - taxes? Is your self-direction contribution to the 401k ($18500 limit) part of this? What about the profit sharing portion ($37500 max)?

This IRS form seems most appropriate: https://www.irs.gov/pub/irs-pdf/p560.pdf --- specifically page 22 of the PDF.

I am trying to figure out what my limit is for contributing to the 401k profit sharing side. I know it's capped at 20% of your net income, so how this number is calc'd is quite important. I would be looking at self-employed for my emplyment classification.

jacoavluha

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Re: Solo 401k - Net Income Definition
« Reply #1 on: November 06, 2018, 08:19:09 AM »
https://docs.zoho.com/sheet/published.do?rid=hd3vb2c79aa2e630443d58a05e8140934898a

use this spreadsheet to calculate your allowed contribution amounts to your solo 401k
note you have to change the inputs in the upper section to reflect current figures for social security wage base, elective deferral limits, and annual plan addition limit for 2018

is your only income, from self employment? Do you participate in any other retirement plans, if you have another job?

kenmoremmm

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Re: Solo 401k - Net Income Definition
« Reply #2 on: November 06, 2018, 04:00:23 PM »
thanks for the link. i will study at home.

my goal would be 100% self employed (contractor position). so, no other income sources.

kenmoremmm

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Re: Solo 401k - Net Income Definition
« Reply #3 on: February 03, 2019, 10:29:31 PM »
can someone help me understand line 19 of schedule C?
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

is the contribution to solo 401k listed under this line?

AdrianC

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Re: Solo 401k - Net Income Definition
« Reply #4 on: February 05, 2019, 08:05:03 AM »
Yes. You might also be able to deduct a spouse's IRA contribution on line 23. Last year was $58,770 on line 19, $5,500 on line 23.

DavidAnnArbor

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Re: Solo 401k - Net Income Definition
« Reply #5 on: February 05, 2019, 09:13:24 PM »
can someone help me understand line 19 of schedule C?
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

is the contribution to solo 401k listed under this line?

Absolutely not.

Line 19 are contributions to a plan that you made for your employees.

Your own contribution (both as the employee and as the employer)  to your Individual 401k for your sole proprietor business goes right on the front page of the 1040 form itself, not on Schedule C.

kenmoremmm

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Re: Solo 401k - Net Income Definition
« Reply #6 on: February 05, 2019, 10:31:12 PM »
can someone help me understand line 19 of schedule C?
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

is the contribution to solo 401k listed under this line?

Absolutely not.

Line 19 are contributions to a plan that you made for your employees.

Your own contribution (both as the employee and as the employer)  to your Individual 401k for your sole proprietor business goes right on the front page of the 1040 form itself, not on Schedule C.

so, if i'm understanding you correctly: line 19 is only if i actually had an employee other than myself?

AdrianC

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Re: Solo 401k - Net Income Definition
« Reply #7 on: February 06, 2019, 10:53:55 AM »
Yes. You might also be able to deduct a spouse's IRA contribution on line 23. Last year was $58,770 on line 19, $5,500 on line 23.

Oops, sorry, yes, David is correct. My 401k contribution was on line 19 of the 1040 for 2017.