Solo 401k FAQ – Do I report both Employee and Employer Solo 401k contributions on my W-2?

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The solo 401k plan, commonly referred to as self-directed Solo 41k is the retirement plan of choice for self-employed individuals or owner-only businesses including for the features highlighted below:

-The highest contribution limits for any defined contribution plan including up to $61,000 (or even $67,500 if you are 50 or older) for 2022, or $66,000 (or even $73,500 if you are 50 or older) for 2023.

-The ability to make pre-tax, Roth, and even Mega Backdoor Roth contributions.

-401k participant loans of up to $50,000

-Invest with checkbook control in real estate, cryptocurrencies, notes, private placements, and other types of alternative investments.

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Solo 401k plans are a popular retirement savings option for self-employed individuals and small business owners. These plans allow individuals to save for retirement while also benefitting from potential tax advantages. One common question that individuals have about Solo 401k plans is whether they need to report both employee and employer contributions on their W-2 forms.

The answer to this question is yes. Both employee and employer contributions to a Solo 401k plan must be reported on the individual’s W-2 form. Employee contributions are made on a pre-tax basis, meaning they are deducted from the individual’s gross income before taxes are calculated. These contributions are reported in Box 12 of the W-2 form with the code “D.”

Employer contributions, on the other hand, are made by the business on behalf of the individual as the employer. These contributions are tax-deductible for the business and must be reported on the individual’s W-2 form as well. Employer contributions are reported in Box 12 of the W-2 form with the code “Y.”

It is important for individuals with Solo 401k plans to ensure that both employee and employer contributions are accurately reported on their W-2 forms. Failing to report these contributions correctly could result in penalties from the IRS. Additionally, accurately reporting contributions will ensure that individuals receive the full tax benefits of their Solo 401k plan.

In conclusion, if you have a Solo 401k plan, it is important to report both employee and employer contributions on your W-2 form. Be sure to review your W-2 form carefully and consult with a tax professional if you have any questions or concerns about reporting your contributions. By accurately reporting your contributions, you can maximize the tax benefits of your Solo 401k plan and ensure that you are on track for a secure retirement.