Solo 401-K maximum contributiom

Technical topics regarding tax preparation.
#1
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There is a maximum annual employee elective deferral amount to a Solo 401-K. But is there a maximum monthly amount?

A sole owner of a S-corp is 52 years old. So his 2019 maximum employee elective deferral is $25,000 ($19,000 + $5,000 catchup contribution). Lets say he had only made a total of $15,000 elective deferral by the end of November, can he make a contribution of $10,000 in the month of December (assuming his wages in December is enough to cover it) to bring his annual contribution to the maximum?
 

#2
HowardS  
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Yes.
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#3
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HowardS wrote:Yes.

Sorry, do you mean ‘yes’ that there is a maximum monthly contribution amount?

Or do you mean ‘yes’ that he can contribute as much as he wants ($10,000 in this case) to bring his annual contribution amount to the maximum?
 

#4
HowardS  
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Or do you mean ‘yes’ that he can contribute as much as he wants ($10,000 in this case) to bring his annual contribution amount to the maximum?


That yes. :)
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#5
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Thank you HowardS.

So the sole owner of an Scorp can open a solo 401k in December 2019 (assuming he has made no retirement contribution before for 2019). He then pays himself a large salary of $27,000 for the momth of December and then he is allowed to make the full amount of $25,000 (lets say that is the net amount after deductions) as elective deferral, all done in the month of December before the end of the year. Did I get it correctly?
 

#6
HowardS  
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Correct. As one firm describes it:
For a corporation, employee salary deferral contribution must be done through the payroll.
Using a W-2 form, an employee of a C Corporation or S Corporation can make a deferral contribution at any time within the year when the income to be contributed is earned. Timing of the contribution typically will depend on the corporation’s payroll structure.

If the corporation uses a payroll company, a deferral contribution generally will be deducted from the employee’s paycheck. If the company does not use a payroll company, an employee can elect to make a deferral contribution at any time during the year.

The Department of Labor’s safe harbor guidelines stipulate that a deferral contribution to a Solo 401(k) account is to be made within seven days of the date on which the employee elects to make the contribution.
An employee who elects to make a deferral contribution in a given pay period — on Dec. 30, for example — should be sure that his or her paycheck for that period is sufficient to cover the contribution.


(Technically, both deferrals and profit sharing contributions can be deposited by filing deadline + extension)
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#7
taxcpa  
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What about employer contributions directly from the S Corp? Can't they contribute up to 25% of the W2 compensation and deduct the expense? Assuming no other eligible employees, thats an option as long as the total of employee/employer is within the limits.
 

#8
Doug M  
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Yes as to the ER contributions. And as to post #1, Howard assumed no other employees but the sole shareholder. (or you have a safe harbor plan in force) Oops did catch title of thread
 

#9
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taxcpa wrote:What about employer contributions directly from the S Corp? Can't they contribute up to 25% of the W2 compensation and deduct the expense? Assuming no other eligible employees, thats an option as long as the total of employee/employer is within the limits.


Is the 25% based on the figure in box 1 of the sole owner's W-2?
 

#10
JR1  
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yes
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#11
HowardS  
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Box 1 + pretax employee contributions not included in box 1.
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#12
sjrcpa  
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Technically, as compensation is defined in the Plan.
 


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