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  • multiple 401k

    I max out my 401k profit sharing each year through my main job, which is a partnership LLC.

    New this year I have a side job where i'll make about $25K as an independent contractor. Can I open a solo 401k for the side job? If so, can I put all $25k into it each year?

    Thank you.

  • #2
    yes you can open a solo 401k if your side job is different from your main job. no you can't put all 25k in. As you maxxed out employee earnings in your main W2 401k, the contributions you make to the solo 401k are only employer contributions which are limited to 20-25% of net profits I believe. So $5k-6,250

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    • #3
      See my post here also for links
      https://forum.whitecoatinvestor.com/...-survey-income

      Comment


      • #4


        The OP needs to clarify if only non-elective employer contributions were made to the W-2 401k as a literal reading would imply.

        If true, the OP could make up to $20.5K in employee deferrals to a one-participant 401K not to exceed their self-employed earned income (net earnings from self-employment) = business profit - 1/2 SE tax. Non-elective employer contributions would be limited to 20% of their (self-employed earned income - employee deferrals) / 2.

        If they maximized their employee deferrals at their W-2 401k. Their one-participant non-elective employer contributions would be limited to 20% of their self-employed earned income.

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        • #5
          Originally posted by spiritrider View Post

          The OP needs to clarify if only non-elective employer contributions were made to the W-2 401k as a literal reading would imply.

          If true, the OP could make up to $20.5K in employee deferrals to a one-participant 401K not to exceed their self-employed earned income (net earnings from self-employment) = business profit - 1/2 SE tax. Non-elective employer contributions would be limited to 20% of their (self-employed earned income - employee deferrals) / 2.

          If they maximized their employee deferrals at their W-2 401k. Their one-participant non-elective employer contributions would be limited to 20% of their self-employed earned income.
          This could be a situation for a MBR 401k, so instead of doing the above they can just contribute the entire $25k as voluntary after-tax and convert to Roth. That is assuming that the 1099 income is not related to the main practice income. Although for variable $25k a year income I'm not sure if it's worth the hassle, I would prefer higher 1099 income that is relatively stable.
          Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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          • #6
            OK thanks for the info.
            For my main job I am paid as K1 partnership income, and will max out the $61K for the 401k profit sharing in 2022.
            The side job is medical directorship 1099 income, which I guess you could say is related to my main job.

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            • #7
              Originally posted by RadMoneyMD View Post
              OK thanks for the info.
              For my main job I am paid as K1 partnership income, and will max out the $61K for the 401k profit sharing in 2022.
              The side job is medical directorship 1099 income, which I guess you could say is related to my main job.
              You would need to clarify whether the two businesses are a "controlled group"
              See the examples here or post your situation
              https://www.whitecoatinvestor.com/multiple-401k-rules/

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              • #8
                Originally posted by RadMoneyMD View Post
                OK thanks for the info.
                For my main job I am paid as K1 partnership income, and will max out the $61K for the 401k profit sharing in 2022.
                The side job is medical directorship 1099 income, which I guess you could say is related to my main job.
                This is a potential affiliated service group which is much more complex than a controlled group. The big question is, how exactly the 1099 job is related to the main job (for example, if the hospital is the employer for both, or if the money flows through your practice for the 1099 job, it could lead to ASG determination, which ends up with the same controlled group rules being applied).
                Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

                Comment

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