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  • Solo 401k

    Hey everyone,

    I'm a W-2 employee and have already maxed my 2022 401k employee contributions (via pretax and Roth portions) up to 20500.

    I also had 1099 income moonlighting this past year (sole proprietor).

    I want to open up a solo 401k and just dump most of my 1099 income for more contributions, particularly via mega backdoor Roth via solo401k (i.e. via solo401k providers that offer the mbdr like

    This would be favorable to the alternative of just doing 20% employer only contributions for 1099 solo401k.

    Am I able to open up the solo 401k now before the tax deadline (but after 12/31/2022) and contribute to it via a mega backdoor Roth for the 2022 tax year?

    ​​​​​​​If so, this does not interfere with my 20500 limit already reached via my 401k from my W-2, correct?


  • #2
    You have until your tax filing deadline (4/18/23) including extensions (10/16/23) to adopt a one-participant 401k and make contributions.

    The employee deferral limit (2022 = $20.5K & 2023 = 22.5K) only applies to employee deferrals. The (employee + employer) annual addition limit is (2022 = $61K & 2023 = $66K).


    • #3
      Originally posted by spiritrider
      The employee deferral limit (2022 = $20.5K & 2023 = 22.5K) only applies to employee deferrals. The (employee + employer) annual addition limit is (2022 = $61K & 2023 = $66K).
      So for the mbdr solo 401k, I can contribute up to 61k total (assuming I make that much net profit via 1099) in addition to my already contributed 20500 via W2 401k?

      I know there is a cap on emploYEE contributions regardless of how many 401Ks you have (I.e., 20500 for 2022). I just wanted to clarify that doing mbdr via the solo 401k doesn't count as an emploYEE contribution...?


      • #4
        There are employee deferrals (traditional & Roth) and employee after-tax contributions. Only employee deferrals are included in the employee deferral limit. The annual addition limit includes all employee contributions and all employer* contributions.

        *Employer contributions are not compensation. They reduce compensation and can reduce available annual addition space.


        • #5
          Correction to the OP - the contribution (or employer matching) limit for 2023 is $66k ($73,500 if age 50+). It is calculated based on (net business profits - [50% of related FICA taxes)]. The catchup contribution cannot be used for MBD Roth limits, though.
          My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
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