Roth 401K double check

Technical topics regarding tax preparation.
#1
taxcpa  
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Client is a single member LLC with a S Corp election. No problem there.

They opened a Roth 401K in 2019 and contributed $1,000 in the last quarter. At the moment, they have charged the $1,000 to distributions. There is no mention of it on the W2, and boxes 1,3,& 5 are equal.

I have inquired as to whether the contribution is an employer or employee contribution. While I wait for that answer, it occurs to me that a quick check of how these are treated would be good.

If I understand correctly: Employer contribution would be not be reported on the W2, not affect FICA, is deductible to the employer, and is considered a pretax contribution as far as the employee is concerned.

If its an employee contribution, I will need to prepare a W2C to increase boxes 1, 3,& 5 by the amount of the contribution and show it in box 12. I will also need to prepare a 941X to show the additional FICA taxable income and pay the additional tax due. The contribution will then be post tax from the employee perspective.

Have I got this correct?
 

#2
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Farmington, Michigan
Employer's contribution goes into the traditional 401k, so yes it's pretax. Also yes it's deductible by employer and it doesn't affect W2 & FICA.

If employee contribution, a W2C being needed would depend upon what the gross wages were and what was reported on the W2.
Dave

Taxation is the price we pay for failing to build a civilized society. ~ Mark Skousen
 

#3
taxcpa  
Posts:
716
Joined:
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Location:
USA
Overnight it occurred to me that a contribution from personal funds might be considered as having come from net pay.

If so, the only correction would be to update box 12 on the W2. Boxes 1,3,& 5 would be OK. No 941X needed.
 


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