Not contribute as per 401(k) election?
I submitted adoptions documents for a solo 401(k) to fidelity on Dec 31, with an election of 10,000$ for 2020. I meant to make that election for 2021. Do I have to contribute the full 10k for 2020? Does the election on the adoption agreement get reported anywhere?
Fidelity opened the solo 401(k) in mid-jan. I have not contributed anything to it. I have now received a letter from the irs saying my application for an EIN for the plan is on hold and want to know when I made a contribution to the plan? I haven’t made any contribution but do I give them the date for when I made the election and then contribute that amount?
Permalink Submitted by William Tuttle on Thu, 2021-02-04 01:38
A one-participant 401k plan is not like opening an IRA account. The fact you submitted Fidelity’s self-employed 401k plan adoption agreement on 12/31 means absolutely nothing.
You really should have submitted it no later than 12/15. There is always a crunch at year end. The plan is not adopted until Fidelity executes the adoption agreement.
If a 2020 one-partipant plan was not adopted until mid-January 2021, then the employee deferral election was not completed by 12/31 and therefore not effective for the 2020 tax year.
New rules went into effect for the 2020 tax year. You now have until the businesses tax filing dealine including extensions to adopt a 401k plan. However, if the plan is adopted after 12/31, there is no way an employee deferral election could have happen for 2020, because that is still required by 12/31.
Therefore, you can only make employer contributions for the 2020 tax year.