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Put money to Solo 401k in 2023 for 2022
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8 Replies
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Top ForumsSolo 401k Contributions, Solo 401k I am self-employed and get 1099 from the company I work with. I file my income in schedule C. Your team helped me set up my solo 401k account. I have three accounts: pre-tax, after-tax, and Roth account.
I didn’t transfer any money to my solo 401k accounts in 2022. In Jan. 9, 2023, I put $50k in my after-tax account and transferred the $50k to my Roth account the next day. Later I learned I will get 1099-R for the $50k in 2024 since it was converted in 2023.
I would like to confirm
0. Is it ok I didn’t transfer any money in 2022? Is there a minimum account that I need transfer in a year? In 2021 I put $57k in my Roth account.
1. Is it still my 2022 contribution since it’s before the deadline 4/18/2023 to file 2022 tax returns? Will it is considered as the employer’s contribution since employer’s contribution deadline is 4/18/2023?
2. Do I need fill any form or provide any information about this to IRS to let them know I made a contribution from my 2022 income for my 2022 solo 401k in Jan. 2023? or do I need prepare a statement explaining this to IRS when I file 2022 tax returns? Or how do IRS know this?
3. Since the 1099R will be available in 2024, if I will contribute another $20k in Dec, 2023 from year 2023’s income (estimate my 2023 income is $60k). Then will the $50k and $20k be two 1099-R forms? How do IRS know $50k for 2022, $20k for 2023?
Thank you so much.
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Top ForumsSolo 401k, Daily Live Webinar
1. This confirms that there is no minimum contribution requirement such that it is acceptable from a solo 401(k) perspective if no contributions were made during the calendar year 2022.
2. For plans that were established before December 31, 2022, the deadline to make all types of solo 401k contributions for 2022 is the business tax return deadline including anytime we filed extension in 2023.
3. For a self-employed business taxed as a sole proprietorship (e.g., self-employment income reported on schedule C of the 1040), pretax Solo 401K contributions are reported on form 1040. Roth and voluntary after-tax Solo 401K contributions are not reportable. As such, and as applicable, it is best to coordinate with the business tax advisor to ensure that contributions are reported accordingly.
4. In order to make contributions for 2022, one must report earn self-employment income for 2022 that justifies such 2022 SOLO 401K contributions. In this case, I understand that the income that would justify these contributions will in fact be reported as 2023 self-employment income. In this case, these contributions would need to be reported as 2023 solo 401K contributions.
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Top ForumsSolo 401k Contributions, Solo 401k
Hello George,
I don’t own a company. I work as sole proprietorship. The fund transferred is for 2022 contribution. I earned $180k in 2022. I learned vanguard can mark it as 2022 contribution if transferred after Dec. 31, 2022 and before April 15, 2023. Can we do that? Thank you.
BTW, I may earn only $60k net income in 2023.
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Top ForumsSolo 401k, Daily Live Webinar
1) I understand that you have the 2022 self-employment income to justify the contributions that will be made in 2023 on or before the business tax return deadline including any timely filed extension (i.e. 1040 for a business taxed as a sole proprietor). In that case, this is certainly acceptable.
2) Moreover, I understand that additional contributions may be made during the calendar year 2023 for 2023. This is acceptable from a solo 401k perspective provided that one has 2023 self-employment income to justify such contributions and subject to the 2023 contribution limits.
3) The fact that one may end up converting voluntary after-tax funds to the Roth Solo 401k in an amount that exceeds the contribution limits for the particular year during which the conversion occurs presents is certainly acceptable from a Solo 401k perspective because there is no limit to how much one may convert from a voluntary after-tax solo 401k sub-account to a Roth Solo 401k sub-account (and the conversion is reportable on a 1099-R for the year of the conversion – i.e. the sum of all conversions during the year will be reported on one 1099-R for such year).
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Top ForumsSolo 401k Contributions, Solo 401k
Hello George,
Thank you so much for the explanation. I really appreciate it. Can you see if my understanding is correct:
Solo 401k contribution limits for 2023 is $66k. I already put $50k in 2023. If I earn net income is $60k on schedule C in 2023 tax returns, I can contribute about $30k for 2023 based on calculation. However, since there is a limit of $66k for 2023 of total conversion, then I can convert another $16k in 2023 besides the $50k. So total won’t exceed $66k.
In my 2023 tax returns, it shows my schedule C next income is $60k, and the 1099-R shows $66k contribution. Is it ok? Thank you so much.
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Top ForumsSolo 401k, Daily Live Webinar
1) Both 2022 and 2023 contributions can be made during 2023. The ability to make 2022 Solo 401k contributions is based on self-employment income reported for 2022. The ability to make 2023 Solo 401k contributions is based on self-employment income reported for 2023. There is no requirement to aggregate as suggested in your post.
2) Please note that one may not contribute more than they earn. For example, for 2022 with net self-employment income of $60,000 reported on Line 31 of Schedule C, self-employment compensation is equal to Line 31 LESS one-half of the self-employment tax (i.e. $4239) which amounts to $55,761. As such, the most that one may contribute as a voluntary after-tax contribution is $55,761 assuming that no other contributions are made to the plan since the voluntary after-tax Solo 401k contribution limits is 100% of self-employment compensation not to exceed the overall limit ($61k) for 2022 REDUCED BY any other contributions made to the Solo 401k.
3) Please note that the 1099-R does not show the contribution amount. Instead, it shows the amount being converted from the voluntary after-tax solo 401k sub-account to the Roth solo 401k sub-account.
See more including recent webinar: https://www.mysolo401k.net/solo-401k-calculating-solo-401k-contributions-sole-proprietor/
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