Awesome Travis. Thanks for taking up the question. To summarize for others: As a sole owner of an S Corp, if I have a net income of $100k, I can do the W2 wages of $63k which will allow me $19.5k employee contribution (pre-tax) + $38k employee after-tax contribution + about $5k in FICA taxes, (19.5+38+5.5 = 63). Hope this helps! The FICA tax calculation comes from Travis' other video (basically 15.3% ÷ 2).
I'm a single llc owner and would like to know for 2024 can i contribute up to $66K to a solo 401k? If so, how much of that would i be able to write off in my taxes? Only a percentage? Or the full amount?
Travis thanks for all your help I am very surprise this topic do not have more comments. I have a couple of questions. I don't have any w2 income. But i have sole propiertor income from 2 schedule C (online sales and ride share). My gross income will be around 40k in both line 31 combined, i will love to set up a Roth Ira and Roth Solo 401k. The 23k limit for the Roth Solo 401k is the maximal ? Or I can also add 7k to the Roth Ira (total 30k). Also, do I have to setting up 2 different Roth Solo 401k accounts, one for each of the schedule C? Thanks
hey! I am a sole proprietor and want to contribute to my 2021 solo 401k at vanguard before taxes due (yikes!) . Does my "employer" portion end up on my schedule C as an expense, and then my "employee" contribution portion ends up on schedule 1, line 16? thanks!
I am 60+ Sole owner of S Corp. As an Employee I paid myself a $100k salary 2023. If I contributed $30k towards pre-tax solo 401k, can the S Corp contribute additional $ towards the employee's ROTH 401k?
The employer match depends on the plan docs. If you update them to allow it then yes, otherwise, possibly a conversion but again, it depends on plan documents. I know that may sound silly but that's the key. The documents have to specifically say you can do it.
Sorry for my lack of understanding skills, I have S corp and me and wife are employees of the company, My company makes about 200K net and I draw 50K in W2 and wife's 23K in W2 and rest comes in K1. We both plan to max out 19.5K from W2 this year, but can we max out 61K both in after tax contribution and the convert it to Roth?
Contributing the employee part to a pre-tax deductible traditional 401k, am I loosing money because this amount is deduct, I would get less QBI deduction?
Great video, @Travis! (follow-up Q from @birbal) On that last part of you video, if you're in a solo-K (do your own payroll) and want to max out the employee after-tax, are you saying there's a way to pay the FICA, etc. out of pocket, leaving 100% of W-2 wages avail to go into the plan? (e.g. maybe you only have $20K of wages left to pay yourself in the year, or you have $60K it total wages, which is under the $61K max)
Right, so technically, your company doesn’t pay your taxes, you do. So it could be paid from distributions which wouldn’t increase w2. Or a personal bank account too. In practice, you just run payroll and withhold throughout the year and make the contributions to your retirement plan based on gross income. If you have no money in your personal account and zero distributions then you can’t do this. I need to make a video on this too and draw it out.
Thanks, @@TravisSickle. Good to hear it's pretty straightforward since, for those looking to max out retirement contributions, such as with the mega backdoor Roth, they truly could achieve saving the full 100% of W-2 comp and just use outside savings/distributions to cover the payroll taxes.
@@TravisSickle That's what I figured, glad to see it confirmed. Since your 401k contribution limit is based on gross FICA wages you can top up your voluntary after-tax contribution with other available cash, perhaps from a deemed distribution left in the company's custody rather than deposited into your bank account, to actually reach your limit when your net FICA wages after payroll and income tax withholdings aren't sufficient to get you there. If not then the limit is given no effect since you can't actually reach it. Can you do the same with elective deferrals (base and catch-up), or does this two-step only work with voluntary after-tax contributions? In any case, I'd love to see your video on it. While I'm on the subject of withholding, can the s-corporation pay income tax you owe on your distributions through a withholding payment to EFTPS? A big year-end payment of this kind would be so much more convenient than quarterly estimated tax payments.
@@headlibrarian1996 The lmits are capped by your income or plan limits, whichever is lower. Our tax system is a pay as you go system so you can't avoid the quarterly pay. I actually just withhold my taxes via my own payroll for my s-corp. Effectively, I end up paying myself the amount needed to withhold taxes and fund my retirement accounts and then the remainder is as a distribution.
Awesome Travis. Thanks for taking up the question. To summarize for others:
As a sole owner of an S Corp, if I have a net income of $100k, I can do the W2 wages of $63k which will allow me $19.5k employee contribution (pre-tax) + $38k employee after-tax contribution + about $5k in FICA taxes, (19.5+38+5.5 = 63). Hope this helps!
The FICA tax calculation comes from Travis' other video (basically 15.3% ÷ 2).
I'm a single llc owner and would like to know for 2024 can i contribute up to $66K to a solo 401k? If so, how much of that would i be able to write off in my taxes? Only a percentage? Or the full amount?
Travis thanks for all your help I am very surprise this topic do not have more comments.
I have a couple of questions.
I don't have any w2 income. But i have sole propiertor income from 2 schedule C (online sales and ride share). My gross income will be around 40k in both line 31 combined, i will love to set up a Roth Ira and Roth Solo 401k. The 23k limit for the Roth Solo 401k is the maximal ? Or I can also add 7k to the Roth Ira (total 30k).
Also, do I have to setting up 2 different Roth Solo 401k accounts, one for each of the schedule C? Thanks
hey! I am a sole proprietor and want to contribute to my 2021 solo 401k at vanguard before taxes due (yikes!) . Does my "employer" portion end up on my schedule C as an expense, and then my "employee" contribution portion ends up on schedule 1, line 16? thanks!
I am 60+ Sole owner of S Corp. As an Employee I paid myself a $100k salary 2023. If I contributed $30k towards pre-tax solo 401k, can the S Corp contribute additional $ towards the employee's ROTH 401k?
The employer match depends on the plan docs. If you update them to allow it then yes, otherwise, possibly a conversion but again, it depends on plan documents. I know that may sound silly but that's the key. The documents have to specifically say you can do it.
Sorry for my lack of understanding skills, I have S corp and me and wife are employees of the company, My company makes about 200K net and I draw 50K in W2 and wife's 23K in W2 and rest comes in K1. We both plan to max out 19.5K from W2 this year, but can we max out 61K both in after tax contribution and the convert it to Roth?
got it, give me a few to run some numbers...
$73k max total. It's capped at your income. You would need to increase it to $61k each to max it out.
Contributing the employee part to a pre-tax deductible traditional 401k, am I loosing money because this amount is deduct, I would get less QBI deduction?
You are not losing money doing this.
Great video, @Travis! (follow-up Q from @birbal) On that last part of you video, if you're in a solo-K (do your own payroll) and want to max out the employee after-tax, are you saying there's a way to pay the FICA, etc. out of pocket, leaving 100% of W-2 wages avail to go into the plan? (e.g. maybe you only have $20K of wages left to pay yourself in the year, or you have $60K it total wages, which is under the $61K max)
Right, so technically, your company doesn’t pay your taxes, you do. So it could be paid from distributions which wouldn’t increase w2. Or a personal bank account too. In practice, you just run payroll and withhold throughout the year and make the contributions to your retirement plan based on gross income.
If you have no money in your personal account and zero distributions then you can’t do this.
I need to make a video on this too and draw it out.
Thanks, @@TravisSickle. Good to hear it's pretty straightforward since, for those looking to max out retirement contributions, such as with the mega backdoor Roth, they truly could achieve saving the full 100% of W-2 comp and just use outside savings/distributions to cover the payroll taxes.
Then again, I guess the $6/$7K backdoor Roth could be used to mop up earned income that was used for payroll taxes and instead of the 401(k)
@@TravisSickle That's what I figured, glad to see it confirmed. Since your 401k contribution limit is based on gross FICA wages you can top up your voluntary after-tax contribution with other available cash, perhaps from a deemed distribution left in the company's custody rather than deposited into your bank account, to actually reach your limit when your net FICA wages after payroll and income tax withholdings aren't sufficient to get you there. If not then the limit is given no effect since you can't actually reach it. Can you do the same with elective deferrals (base and catch-up), or does this two-step only work with voluntary after-tax contributions? In any case, I'd love to see your video on it.
While I'm on the subject of withholding, can the s-corporation pay income tax you owe on your distributions through a withholding payment to EFTPS? A big year-end payment of this kind would be so much more convenient than quarterly estimated tax payments.
@@headlibrarian1996 The lmits are capped by your income or plan limits, whichever is lower. Our tax system is a pay as you go system so you can't avoid the quarterly pay. I actually just withhold my taxes via my own payroll for my s-corp. Effectively, I end up paying myself the amount needed to withhold taxes and fund my retirement accounts and then the remainder is as a distribution.