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  • Profit Sharing of 1099 income

    I have side income that is paid as 1099. Was told I could take roughly 20% and place into individual 401k as "profit sharing."  My regular full time employment is through W-2 and I have an employer 401k with a match that I have already fully funded.

    Trying to figure out the rules on this.  Anyone have any insight into this?  My 1099 income pays to me directly.  It is not in an LLC, or other personal corporation type.

     

     

  • #2
    You've been told right (which ironically, not all of us can say about things we've been told!)

    You can have a separate 401k for every unrelated job. Here is WCI's post on it. You can search for other 401k topics on the site, too for an excellent overview of the subject.

    Good luck!

    Wanted to add: you do not need to set up and LLC or other corp structure to have a solo 401k associated with 1099 income.

     

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    • #3




      I have side income that is paid as 1099. Was told I could take roughly 20% and place into individual 401k as “profit sharing.”  My regular full time employment is through W-2 and I have an employer 401k with a match that I have already fully funded.

      Trying to figure out the rules on this.  Anyone have any insight into this?  My 1099 income pays to me directly.  It is not in an LLC, or other personal corporation type.

       

       
      Click to expand...


      Docbeans is correct. Your CPA or support at an online brokerage handling SOLO 401k's should be able to help you with this. It is too late to contribute for 2015 but you still have time to fund a SEP for 2015. Then you can open the SOLO-k for 2016 and roll the SEP into it and contribute to the SOLO-k for 2016.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        Johanna,

         

        I was also told, if an extension is filed (which I did) then the deadline is extended as well.

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        • #5
          Actually, I'd like to know the answer to that question, as well. Let's hope Johanna/someone else looks at this thread again.

          Comment


          • #6




            Actually, I’d like to know the answer to that question, as well. Let’s hope Johanna/someone else looks at this thread again.
            Click to expand...


            That's correct, you can extend the deadline for the SEP contribution if you file for an extension.
            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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            • #7




              Johanna,

               

              I was also told, if an extension is filed (which I did) then the deadline is extended as well.
              Click to expand...


              Only for a SEP, not for a 401k, SOLO or otherwise.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

              Comment


              • #8




                Johanna,

                 

                I was also told, if an extension is filed (which I did) then the deadline is extended as well.
                Click to expand...


                Only for a SEP, not for a 401k, SOLO or otherwise.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                Comment


                • #9
                  I don't currently have a SEP-IRA.  I have a 401k (through my W-2 employer) that is maxed out and I already have an individual IRA that I already funded for 2015 prior to the deadline which got rolled over into a Roth.  Can I still open a SEP-IRA with the "profit sharing" 18% of 1099 income (keep in mind I did file extension for 2015), or have I missed the boat?

                  Are there any rules into not being allowed to have a SEP-IRA when I already have these other accounts open and funded?

                  Thanks all.

                  Comment


                  • #10
                    Yes, you can still max out a SEP plan, up until 10/15/16, as long as you are not an owner (at least 80%) of the W2 employer. Doubt you are :-) That is the primary benefit of a SEP - the ability to open and fund an account 9-1/2 months after the close of the year.

                    btw, your "Individual" Retirement Account (IRA) has no bearing on your ability to contribute to an "Employer" plan. The SEP is an employer plan.
                    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11
                      I already have an IRA with a back door Roth that was funded up to the max for 2015.  I think that excludes me from having a SEP-IRA?

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                      • #12
                        No, it does not. A TIRA is personal; a SEP is employee (business). You can have both.
                        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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