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Logistics of contributing to my solo 401k

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  • Logistics of contributing to my solo 401k

    Hi, currently getting my solo 401k set up and was hoping someone who's done it before can give some advice.

    Currently have an S-Corp that was set up this year, will make around 350K to 400K this year, probably end up paying myself around 250K. I use gusto for payroll.
    In the process of setting up a solo 401K with Fidelity.

    My question is: can I just take $61,000 from my business bank account and put it into the Fidelity solo 401K account? Basically all employer contribution, and without going through the payroll with gusto? I know there is supposed to be a employer and employee contribution but this just seems easier.

    Thank you all for your help, sorry still new to this.

  • #2
    No plus you would make your payroll a heck of a lot more complex b/c you would then have to adjust through Gusto or your W2 would be incorrect. Just go through the front door like everybody else.

    Welcome to the forum!
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Thanks for the response!

      If I do go through Gusto, is there any downside in doing all 61k as employer contribution? Or is it better to split it into 20K as employee and 41k as employer?

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      • #4
        Over contributions possible? Are you immune from car accidents? Employee comes from payroll actually paid. Employer comes from your S-Corp.
        SR often says to not think of this as an IRA. Same rules as a full blown 401k.
        Not and expert, but you need to be .

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        • #5
          Originally posted by Tim View Post
          Over contributions possible? Are you immune from car accidents? Employee comes from payroll actually paid. Employer comes from your S-Corp.
          SR often says to not think of this as an IRA. Same rules as a full blown 401k.
          Not and expert, but you need to be .

          Yes I understand they are from 2 different sources, but since I'm the owner and only employee of the S Corp, does it all end up being the same whether I take it from payroll or from the S-Corp? As long as 25% of my W2 is over the 61k it shouldn't really matter right?

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          • #6
            Originally posted by Alex2022 View Post


            Yes I understand they are from 2 different sources, but since I'm the owner and only employee of the S Corp, does it all end up being the same whether I take it from payroll or from the S-Corp? As long as 25% of my W2 is over the 61k it shouldn't really matter right?
            Wrong. Payroll deduction vs employer contributions are different.
            The IRS requires specific reporting. For example, income is separate from expenses. You aren’t allowed to just report net income. You have to prove you withheld from payroll. You could send the money at one time. Your responsibility is to keep the detail records to prove it.

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            • #7
              Yes I understand they are different sources and will be reported differently.

              My question is, can I
              Option 1: pay the 61k from my S-Corp and just report that as an business expense. No payroll withholding.
              Option 2: pay 41k from S Corp, report that as business expense, and then pay 20k withheld from my income, and report that as income withheld.

              Is that a problem with doing the first option? It just seems simpler and the amount i end up paying out is the same.

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              • #8
                Originally posted by Alex2022 View Post
                Yes I understand they are different sources and will be reported differently.

                My question is, can I
                Option 1: pay the 61k from my S-Corp and just report that as an business expense. No payroll withholding.
                Option 2: pay 41k from S Corp, report that as business expense, and then pay 20k withheld from my income, and report that as income withheld.

                Is that a problem with doing the first option? It just seems simpler and the amount i end up paying out is the same.
                The withholding needs to be in the payroll. If you can do tax withholding and any other deductions in one paycheck, then your 941's and 940's will balance.
                And your state workman's comp return. Three other payroll related taxes. You are worried about the payment, false efficiency. Worry about your payroll records and those returns. I take it you are familiar with payroll and all the social security, medicare, FUTA and SUTA taxes. Not to mention state and local income taxes if applicable. Payroll is much harder. See how you can get it in one payroll.

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                • #9
                  Originally posted by Alex2022 View Post
                  Yes I understand they are different sources and will be reported differently.

                  My question is, can I
                  Option 1: pay the 61k from my S-Corp and just report that as an business expense. No payroll withholding.
                  Option 2: pay 41k from S Corp, report that as business expense, and then pay 20k withheld from my income, and report that as income withheld.

                  Is that a problem with doing the first option? It just seems simpler and the amount i end up paying out is the same.
                  Let’s approach it this way:
                  • Employee deferrals must be withheld by 12/31 of the year for which they are reported
                  • Employer profit sharing can be contributed up to and including the due date of the tax return, including extensions
                  Different due dates. Even if we decide to overlook all of the other silly rules, can you see why this might present a problem?
                  Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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