ER roth contribution to EE individual roth 401k
I am self-employed and opened an individual 401k and Individual Roth 401k. In order to take a business deduction, I have to make a contribution to the 401k plan (for myself), as an employer contribution. I was hoping to make the contribution to the Roth portion but plan document won’t allow that. It will only allow Roth contribution to be made by the EE(employee). I can’t do that and take a business deduction for the contribution. Any ideas how to get around that. I ask because I took a Roth distribution (contributions only) thinking I could make a Roth 401k contribution with that money. I certainly don’t want to use that money for a pre tax contribution, because it defeats the whole purpose. Any ideas?
Permalink Submitted by Alan Spross on Fri, 2012-03-16 20:17
This is a real mess, and cannot be resolved without help from the 401k custodian, since your deferrals were apparently made to the wrong portion of the plan but already withdrawn. With a plan amended to add a designated Roth option, you can split the EE contributions between the two, but the total cannot exceed 16,500. Any employer match can ONLY be made to the pre tax account, not to the Roth.
Do you have the 1099R forms for 2011?
Permalink Submitted by mk foss on Sat, 2012-03-17 00:03
I’m going back to the original proposition. If ‘ee makes contributions to a 401k – employer deducts salary (net of 401k contribution) and also deducts the 401k deferral as a profit sharing contribution.
If the deferral goes to the Roth 401k, then employer deducts the salary only – unreduced by the Roth 401k deferral.
If the employer makes a profit sharing contribution to the 401k, that goes to the pretax portion and is deducted as an additional profit sharing contribution.
I don’t see how any deduction is being missed, if we just look at how the situation should be treated.