Author Topic: S-Corp contribution to solo 401k  (Read 3091 times)

sunday

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S-Corp contribution to solo 401k
« on: September 10, 2015, 04:59:03 PM »
Hopefully someone who has an s-corp and contributes to a solo 401k can help me out-

I have a one person (me) s-corp with that is going to make around $15000 this year after expenses. Am I allowed to pay myself that entire $15000 and then put it all in an individual 401k?

I had planned to take half (7500) as pay and half as dividends to avoid the self-employment tax on some of it, but if I pay myself the entire 15000 as salary, leaving no net profit for the business, how does that work? Or do I need to leave enough for the business to pay its half of the self-employment tax? And then do I have to pay the SE tax as an employee before I can put the rest into an individual 401k?

sunday

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Re: S-Corp contribution to solo 401k
« Reply #1 on: September 11, 2015, 09:47:21 AM »
Thank you for sharing that, Knaak, it was very helpful and much appreciated. This is my first year with this S-corp and I'm learning a lot.
Can I ask you if you take any distributions for you s-corp? Say I make $20000 this year, pay myself $10000 using the numbers in your example, have my employer contribution be $2500, leaving $7500 net profit for the corporation, What are the remaining taxes I have to pay on that $7500 before I can take the rest as a distribution?

sunday

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Re: S-Corp contribution to solo 401k
« Reply #2 on: September 11, 2015, 11:27:46 AM »
So, as a general principle, if I don't care about the income but my goal is to shield as much as possible from income taxes (because we are currently hitting the AMT in our household), it seems what I should do is max out the amount I can defer to my 401k, which is like $18000, right?

protostache

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Re: S-Corp contribution to solo 401k
« Reply #3 on: September 11, 2015, 02:57:26 PM »
So, as a general principle, if I don't care about the income but my goal is to shield as much as possible from income taxes (because we are currently hitting the AMT in our household), it seems what I should do is max out the amount I can defer to my 401k, which is like $18000, right?

In general you'd want to max out as much as you can from the employer side, because that doesn't count as wages and isn't shown on your K-1. You still have to pay yourself a reasonable wage.

Honestly, if you're hitting AMT you should be consulting with a CPA for end-of-year tax planning, especially since this is just $15k of that (likely less than 10% of your income). Your tax situation is more complicated than an internet forum can correctly diagnose from the somewhat sketchy notes you've provided.

sunday

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Re: S-Corp contribution to solo 401k
« Reply #4 on: September 11, 2015, 03:54:26 PM »
Yeah, I have an accountant and plan on talking over with her about all this. Just want to inform myself so I have a general idea of what is happening and what my goals are. But thank you for your help. We've been filling up all our saving buckets-- spouse's 401k, back door Roth for both of us, and mega back door roth available thru spouse's workplace. I just started this business and it is my only income, so trying to eek out all the tax savings we can defer as much as I can to a 401K, since I'm not working a regular w-2 job.