solo401k for corp + self-employed
Taxpayer is sole proprietor for first half of 2012, earning $70k. They convert to an S-Corp in July and take a $20k salary on a W-2 for 2nd half of year. They want to maximize what they can do in a solo401k. The employee portion max is $17k if under age 50. Is only one employee portion of $17k allowed per calendar year per taxpayer, or can they count it on the self-employed income and then again on their W-2 wage for the same year, as long as they do not exceed $50k overall? And would 2 different accounts be needed, since they are funding as a sole proprietor and then as a corp?
Keith Kenward 😀
Permalink Submitted by Alan Spross on Sat, 2012-09-08 01:13
Only one elective deferral total of 17k is allowed per taxpayer, regardless of filing entity. I assume that taxpayer’s spouse is the only other employee of the S Corp, otherwise the solo K cannot apply to the S Corp.
The annual additions limit of 50k is per employer, but here you also have just one employer as well. The profit sharing contribution would have to be calculated separately for each entity using the rather complex tax return required for 2012, subject to the overall limit of 50k. I don’t think this would require a different solo K, but you might check that out with the plan provider.