Solo 401K with Spouse Employed
Currently have established solo 401K as a schedule c business with no employees expect spouse. For 2017, spouse did not as W2 employee make employee contributions. Wish the $18K and catch up for a total of $24K was made. Is it possible to have the W2 paid spouse still contribute as an employee before April 17th or is the opportunity lost and only the employer profit sharing contribution can be made?
Permalink Submitted by Alan - IRA critic on Tue, 2018-03-27 16:46
The employee spouse was supposed to have elected the amount of elective deferrals by last 12/31. The W-2 would then be issued to reflect this figure in Box 12, Code D even though the deferrals were not actually made throughout the year. Per the chart on p 3 of Pub 560, the actual contributions of elective deferrals to the plan can be made as late as the tax due date including extensions.
Permalink Submitted by Belle Hender on Tue, 2018-03-27 17:27
Prior to year end, spouse/employee requested 100% pre-tax contribution. W2 was issued (with errors but showing intent correctly) with Boxes 1,3,5 amount $24950 and Box 12d amount $24000. Understanding of tax code reporting is that Box 12d does not need to be corrected but should be less based on employee fica amounts. Please confirm.
Permalink Submitted by Alan - IRA critic on Tue, 2018-03-27 18:18
Seems like Box 1 needs to be far less, just enough to cover the required FICA, with 12d reduced some to allow for the FICA contributions. A 401k deferral cannot be large enough to replace FICA contributions.
Permalink Submitted by Belle Hender on Tue, 2018-03-27 19:21
If done correctly, Box 1 math as the social security amount of $1546.90 plus the medicare amount of $361.78 for the Box 1 total of $1908.68. Box 12d math as $24000 minus the correct box 1 amount of $1908.68 for the amount of $23041.32. Does the W2 need to be corrected or does guidelines direct the employee 100% tax-free contribution amount of $23041.32 to be posted on the 1040 line 28 to rectify?
Permalink Submitted by David Mertz on Tue, 2018-03-27 21:10
I get $24,950 – $361.78 – $1,908.68 = $22,679.54 maximum elective deferral. The employee’s elective deferral goes on the sole proprietor’s Schedule C as a business expense, not on Form 1040 line 28; the employee is not self-employed. The W-2 needs to be corrected.