Solo 401k Contribution Deadline

Solo 401k contribution deadline can vary depending on two factors:

  • The business type (sole proprietorship, single-member or multiple-member LLC, C or S Corporation)
  • The way in which the contribution is made, such as by employee deferral or profit-sharing component of contribution.

Let’s look at the various deadlines according to business and contribution type:

Diligent hands will rule, but laziness ends in forced labor.

Proverbs 12:24

  • Employee Deferral

    The owner of a sole proprietorship may make employee deferral contributions of as much as $18,000 to a Solo 401(k) plan for 2016.

    Those who are 50 and older can tack on a $6,000 annual catch-up contribution, bringing their annual deferral contribution to as much as $24,000.

    According to Solo 401k contribution deadline rules, plan participants must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the personal tax-filing deadline (April 15, or October 15 if an extension was filed).

    Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions.

    Profit Sharing Contribution

    A sole proprietorship may make annual profit-sharing contributions to a Solo 401(k) plan on behalf of the business owner and spouse.

    Internal Revenue Code Section 401(a)(3) states that employer contributions are limited to 25 percent of the business entity’s income subject to self-employment tax. Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation.


    In general, compensation can be defined as your net earnings from self-employment activity.  This definition takes into account the following eligible tax deductions: (1) the deduction for half of self-employment tax and (2) the deduction for contributions on your behalf to the Solo 401(k) plan.

    A sole proprietor’s Solo 401(k) contributions for profit sharing component must be made by the tax-filing deadline (April 15, or October 15 if an extension was filed).

  • Employee Deferral

    The owner of a single member LLC may make employee deferral contributions of as much as $18,000 to a Solo 401(k) plan for 2016.

    Those 50 and older can tack on a $6,000 annual catch-up contribution, bringing their annual deferral contribution to as much as $24,000.

    Solo 401k contribution deadline rules dictate that plan participant must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the tax-filing deadline.
    Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions.

    Profit Sharing Contribution

    A single member LLC business may make annual profit-sharing contributions to a Solo 401(k) plan on behalf of the business owner and spouse.

    Internal Revenue Code Section 401(a)(3) states that employer contributions are limited to 25 percent of the business entity’s income subject to self-employment tax. Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation.

    In general, compensation can be defined as your net earnings from self-employment activity. This definition takes into account the following eligible tax deductions: (i) the deduction for half of self-employment tax and (ii) the deduction for contributions on your behalf to the Solo 401(k).

    A single member LLC’s Solo 401(k) contributions for profit sharing component must be made by its tax-filing deadline.

  • Employee Deferral

    The owner of a multiple member LLC may make employee deferral contributions of as much as $18,000 to a Solo 401(k) plan for 2016.

    Those 50 and older can tack on a $6,000 annual catch-up contribution, bringing their annual deferral contribution to as much as $24,000.

    According to Solo 401k contribution deadline rules, plan participant must formally elect to make an employee deferral contribution by Dec. 31. However, the actual contribution can be made up until the tax-filing deadline. 

    Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions.

    Profit Sharing Contribution

    A multiple-member LLC business may make annual profit sharing contributions to a Solo 401(k) plan on behalf of its business owners. Internal Revenue Code Section 401(a)(3) states that total contributions are limited to 25 percent of the business entity’s income subject to self-employment tax.

    A multiple-member LLC must make any profit-sharing contributions before its tax-filing deadline.

  • Employee Deferral

    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.  

    Pretax and/or after-tax (Roth) funds can be used to make employee deferral contributions.

     

    Profit Sharing Contributions

    The corporation may make annual Solo 401(k) contributions for profit sharing component for its owner(s)/employee(s).  Internal Revenue Code Section 401(a)(3) states that total contributions are limited to 25 percent of the compensation paid.

    The corporation must make any profit-sharing contributions before its tax-filing deadline.

Alternate investment options you get with a Self Directed Solo 401k:

 
Real Estate


Precious Metals


Private Business


Stock & Funds


Private Lending


Tax Deeds/Liens

Financial Concepts that Make Sense!

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