How much can you contribute to retirement plans such as the IRA, SEP IRA and Solo 401(k) if you’re taxed as a sole proprietor or S Corporation and when are the deadlines associated with making these contributions?
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#retirement #SEP #Solo401k…(read more)
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As you approach retirement, it is essential to keep track of the tax deadlines and contribution limits of your retirement accounts. This will help you make the most of your retirement savings and avoid penalties for non-compliance.
Two popular retirement accounts that you may consider are the SEP IRA and Solo 401(k). Both have specific tax deadlines and contribution limits that you need to be aware of. In this article, we will discuss these important details.
SEP IRA
A Simplified Employee Pension (SEP) IRA is a retirement plan that allows an employer to make tax-deductible contributions on behalf of eligible employees. Here are the tax deadlines and contribution limits for a SEP IRA:
Tax Deadline: Contributions can be made up to the employer’s tax-filing deadline, including extensions. For example, if you file your taxes for 2021 by the deadline of April 15, 2022, then you have until that date to make contributions for the 2021 tax year.
Contribution Limit: For 2021, the maximum contribution limit is 25% of the employee’s compensation, up to a maximum of $58,000. This limit is subject to annual adjustments by the IRS.
Solo 401(k)
A Solo 401(k) is a retirement plan designed for self-employed individuals or business owners with no full-time employees other than the business owner or their spouse. Here are the tax deadlines and contribution limits for a Solo 401(k):
Tax Deadline: Contributions can be made until the employer’s tax-filing deadline, including extensions, for the calendar year in which the contributions are made. For example, contributions for the 2021 tax year can be made until April 15, 2022.
Contribution Limit: For 2021, the maximum contribution limit is $58,000 per year. However, this limit includes both employer and employee contributions. As an employee, you can contribute $19,500 in 2021, or $26,000 if you are age 50 or older. The employer can contribute up to 25% of their compensation, not to exceed $58,000 in 2021.
Conclusion
In summary, it is crucial to stay aware of the tax deadlines and contribution limits for your retirement accounts, such as the SEP IRA and Solo 401(k). This will ensure that you can take full advantage of the tax benefits and maximize your retirement savings. Be sure to consult with a financial advisor or tax professional to assist you in managing your retirement goals.
Can I set up a SEP IRA late for employer contribution, single member S corp no employees. It has to be in the name of the S Corp using the Scorp Tax ID correct?
Navi, enjoy your videos. Question: If I made $200k in W2 income in 2022, and just started an LLC with Scorp classification (2/23) is there a way of retroactively contributing to a retirement fund that will lower tax liability for 2022?
Individuals who have solo 401k have to make a salary deferral election by Dec. 31 even though the tax return deadline is later the following year. This is required by the IRS.
Hi, good information. Question- What do you mean when you say 'establishing the plan'. Does it mean opening the account? Or putting the money into 401k account?
Thank you! I’m learning so much following your channel.
Ok
Hi Navi, I do my own payroll as an SCorp. Can you please do a video on how to tie my W2 to my Solo 401K contribution with Form 1120S? For instance, Im over 50. I want to contribute $26,000 to my Solo 401K. I pay myself $48000 as an officer salary. How will I designate the $26,000 on my W2 at year end?
Also, I thought the employer contribution was based off of 25% of your net income (not salary)?