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Questions for Newbie Setting Up New Solo 401k

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  • Questions for Newbie Setting Up New Solo 401k

    I just came across the solo 401k option and am very intrigued! Any guidance as I work through this would be greatly appreciated. I have W2 income through my employed practice, but in addition to that have 1099 income from taking call at multiple hospitals. I max-out my practice's 401k as there is a match. I also max-out my own backdoor Roth IRA, spousal backdoor Roth IRA, and HSA. However, I'd certainly like to take advantage of additional tax savings through a solo 401k. My questions are:

    1. In 2020, my total 1099 income from taking call was $118,150. That being the case, theoretically in 2020 (I know it's too late now, just planning for 2021) I could have contributed $23,630 (20%), correct? I can't also tack-on the additional $19,500 due to my practice-sponsored 401k contributions, right?

    2. How do I go about obtaining the EIN for my solo 401k? Any platforms that you recommend using with low fees?

    3. I use Vanguard for my IRAs and would prefer to also go through them for my solo 401k for ease of unification. Any tips/recommendations on how to properly set this up through Vanguard?

    Thank you in advance! Feel free to provide any additional recommendations that I may have omitted for this "newbie"...

  • #2
    1. Under the SECURE ACT and effective with the 2020 tax year. You now have until your tax filing deadline including extensions to adopt a 401k and make employer contributions. Ironically, it is only too late if you filed on time. Note: The maximum employer contribution for a self-employed one-participant 401k is 20% of net earnings from self-employment (self-employed earned income) = business profit - 1/2 SE tax.
    2. Online thru the IRS.
    3. Vanguard will work, but they do not support employee eligibility restrictions and an in-plan Roth rollover (IRR). Personally, I recommend E-Trade.


    • #3
      1. I already paid on time, but thanks for the info. How do I calculate the self-employed tax? I don't see it listed on the 1099 form that I received.

      2. Thank you. I receive my call checks in my MD PA, which has an EIN. Can I just use that EIN for my MD PA?

      3. Good to know, thank you.