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Solo 401K file dates . Anything change with.m CARES act ?

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  • Solo 401K file dates . Anything change with.m CARES act ?

    I had some 1099 income from 2019 from some legal consulting and my tax accountant advised I can contribute 10K to an i401k. This is my first time opening one and want to contribute to i401k vs SEP to maintain Backdoor Roth eligibility . I’m confused on the deadlines for opening i401k and contributing for the fiscal year particularly with some of the change in deadlines related to CARES act . Any help would be greatly appreciated . Thank you

  • #2
    To contribute for 2019 401k had to be established by 12/31/19

    cares act did change future so a 2020 401k can be established up to 2020 tax filing 4/15/21, or later including extension

    but for 2019 it’s still the old rules

    its not too late for a 2019 sep Ira as long as your 2019 tax return was extended.


    • #3
      Technically, nothing in the CARES Act addressed any tax filing dates. President Trump declared a Nation Emergency and directed the IRS to use their existing statutory and regulatory authority to grant taxpayer relief.

      Your tax accountant is wrong on one point. A one-participant 401k for the 2019 tax year would have had to be adopted by 12/31.2019.

      A business has until their tax filing deadline including extensions to make SEP IRA employer contributions. Whether you can adopt and contribute to a SEP IRA for the 2019 tax year is dependent the business entity type.

      A calendar year S-Corp's tax filing deadline is 3/15 (3/16 this year) including extensions 9/15. This was not extended by any the IRS notices to date. If you created an S-Corp and did not file an extension. You will be unable to adopt and contribute to a SEP IRA for the 2019 tax year.

      A sole proprietorship is filed as part of the individual's personal tax return. They normally have until 4/15 including extensions 10/15 to adopt and contribute to a SEP IRA. Since the tax filing deadline was extended until 7/15 so was the deadline for adopting and contributing to a SEP IRA. Additionally, if you can't get it done by 7/15, you can still file an extension by 7/15 and have until 10/15.

      Note: Since you want to maintain Backdoor Roth capability. You should adopt an individual 401k for the 2020 tax year at a provider that accepts IRA rollovers (not Vanguard). Then you can rollover the SEP IRA and any other pre-tax IRA balancea by 12/31/2020 and be able to do Backdoor Roth conversions with little to no tax liability.
      Last edited by spiritrider; 04-23-2020, 05:41 AM.


      • #4
        Thank you for your insight this was very helpful. My entity is sole proprietorship . I am going to take your advice and open SEP and i401K by 7/15/20 then roll it over by 12/31/20. Is there a necessary time in between before rolling over? Also can still do this even I already made the max backdoor roth for the year . Thank you again .