I have entered Employer contributions for a Solo 401k, but they are not being deducted as a business expense. Please help with why and how to fix.

Forum|Forum|4 years ago
April 17, 2021
3 replies
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I am self employed and have made both Employee and Employer contributions to my Solo 401k. When I enter them in the Turbotax system, the Employee contributions are deducted from my income as they should be, but my Employer contributions are NOT being deducted from my business income. How do I get these to deduct from my business income? Thanks.

TurboTax Self Employed Online

Bsch4477

For pass-through businesses, the employee and employer portion of the Solo 401k contribution is reported on line 15 of Schedule 1. There is a direct connection from Schedule C to Schedule 1. For example, you report business (earned income) from Schedule C on line 3 of Schedule 1. Then, as part of the Schedule 1 calculation, the employer contribution to your Solo 401k becomes part of your adjusted income. Afterward, that is subtracted out of your taxable income. Finally, report adjusted income on line 8a of Schedule 1 on your 1040 form (see line 8b subtraction calculation).

MK48Author

Thanks, that's helpful, but the problem is Turbotax is not including the Employer portion of the contribution in Schedule 1, so Turbotax is not deducting the full amount of contributions. How do I get TurboTax software to deduct the Employer portion in addition to the Employee portion?

LarryH1

I am seeing a slightly different issue...TurbotTax Premiere is correctly tracking employer contributions to Solo 401K for the business owner. However, it is not calculating the employer contribution for a W2 employee as a business expense, which in this case is a spouse. TurboTax allows the entries to be entered for the spouse (in this case filing jointly) but it does not associate the W2 income reported for the spouse with the sole-proprietor as the employer.

As I understand tax laws, a spouse who is a w2 employee of the sole-proprietor and does not have employment elsewhere (no other W2 income) can contribute to the sole-proprietor's Solo 401K. These contributions have to be within contribution limits.

Is this another "unsupported calculation" in TT? If so, where is this documented and what is the work-around? Do I need to override the calculation and enter the correct figure so it shows up as a business expense?

Larry

Nomanation

I am having same issue as this original post. Did you ever find a fix? Thanks

MK48Author

Yes, I did figure it out. In addition to the Solo 401k contributions, I had also made contributions to a SEP IRA. The SEP IRA contributions and Employer Solo 401k contributions count towards the same tax-deductible retirement account contribution limits. I had maxed out my SEP contributions (based on my business income) and therefore the 401k employer contributions put me over the limit. Turbotax correctly will not let you double count.