solo Roth 401(k)

Submitted by mindy applegate on Wed, 2020-04-01 13:05

I have a very small business (sole proprietor) and make less than the dollar contribution limits for a 401(k). I’m trying to contribute as much money as I legally can to my solo Roth 401(k). I was looking up how much I could contribute and found, in a forum, that “catch-up” contributions are not limited to the 100% of earnings less 1/2 SE tax limit. In other words, I can contribute MORE than I make. I’ve searched all over the web and can find nothing to support this, not even on the IRS website. Nor can I find anything to refute this. Does anyone have a reliable reference for this? Thank you!



Submitted by William Tuttle on Wed, 2020-04-01 17:11

Net earnings from self-employment – business profit – 1/2 SE tax. I can’t think of any direct reference off the top of my head, maybe Alan or DMX can. However, complete the Deduction Worksheet for Self-Employed from IRS Publication 560 or any tax software and it will demonstrate this.

Submitted by Alan - IRA critic on Wed, 2020-04-01 17:36

  • Sec 414(v) copied below indicates that the catch up amount is limited by the participant’s actual compensation as stated by spiritrider, therefore the catch up contribution is so limited.
  • (v) Catch-up contributions for individuals age 50 or over(1) In generalAn applicable employer plan shall not be treated as failing to meet any requirement of this title solely because the plan permits an eligible participant to make additional elective deferrals in any plan year.(2) Limitation on amount of additional deferrals(A) In generalA plan shall not permit additional elective deferrals under paragraph (1) for any year in an amount greater than the lesser of—(i)the applicable dollar amount, or(ii) the excess (if any) of—(I)the participant’s compensation (as defined in section 415(c)(3)) for the year, over(II)any other elective deferrals of the participant for such year which are made without regard to this subsection.

Submitted by Rick Feurino on Mon, 2021-06-07 16:06

Scenario: Vacation rental property that is held by a solo 401K. It generates a six figure income annually. The business owner wants to amend his plan to allow for Roth conversion of the income. He is conservative, and want to use an annuity for the converted funds. Can it be done? If so, should the plan be the owner of the annuity and the participant the annuitant? Or can the participant (business owner) be the owner and annuitant? His income is greater than the solo 401k earnings. Is there a contribution limit on the income generated by the property owned by the plan?

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