How much paperwork are we talking about between getting an EIN and the 401(k)? To set it up, plus annually?
Getting an EIN is trivial
online from the IRS. Vanguard will walk you through the steps to opening a solo 401k. The form is 100+ pages, but most is legalese boilerplate. Here is Retire By 40's
Experience with Vanguard’s Individual 401k. Yearly, the paperwork is small---just a line at tax time indicating contributios (unless you have $250k in the account, then there is a 2 page form).
If I get paid under my SS#, can I still contribute that money to the 401(k)? Or do I have to get paid with the EIN? How about if I got paid with cash from a person that wouldn't be filing any 1099 forms (e.g., babysitting)? How much paperwork do I have to keep in terms of my income?
You can contribute based on your reported business income. Cash, things paid under your own SSN, etc. For tax records, you should be keeping track of all income---just a spreadsheet or log book should be sufficient.
Am I screwing myself in re: the IRA - I read that if I have a 401(k) available from my employer I can no longer contribute to a traditional IRA if my income is over $71k/yr (and it is, just barely). Does that include this plan? So if I made $3k in freelance money, I could contribute/tax-shelter $2500+ but would lose my ability to contribute $5500 to a traditional IRA, therefore having LESS tax deferral space available to me? This seems like a potential deal-killer...
You start to lose the deduction for your
IRA contributions at $61k Modified AGI. If you lose any of your deduction for a Traditional IRA, then I'd suggest contributing to a Roth IRA instead.
Run the numbers yourself. You should try to run the numbers to see how it would affect your ability to deduct your IRA contributions. The
Taxcastor could be enough, otherwise create an account at
TurboTax,
TaxAct or
HR Block to run the numbers.