Top https://www.solo401k.com Secrets

People are clambering to finish their 2013 tax obligation year return and also wondering exactly how they can save tax for the 2014 tax obligation year. The Solo 401( k) is a strategy that couple of make use of. It is designed for small company proprietors who have just family members employees. The limit is two individuals, which typically is the business owner and also the partner. The Solo 401( k) is not a new kind of 401( k) strategy and also has the same guidelines and also requirements as any other 401( k) plan. Even more information can be found on the IRS web site (1) and also search for "Retirement-Plans-One_Participant-401k-Plans".

How much can one contribute? The business owner wears two hats in a 401( k) strategy: staff member and also company. Contributions can be made to the plan in both capacities. The owner can elect to delay approximately one hundred percent of settlement (also known as earned earnings for the freelance) as much as $17,500 for both 2013 as well as 2014 tax obligation years. If he is age 50 or over, there can be an added $5,500 (called the "catch-up" payment) to make the total $23,000 per year.

The 2nd part is the employer contribution of up to either 25 percent of the compensation specified by the strategy, normally earnings, or a different calculation for the self-employed person. If the person is age 50 or over, there can be an added $5,500 "catch-up" payment, making the overall maximum contribution to the Solo 401( k) intend $56,500 for 2013 and also $57,500 for 2014.

Instance of a Schedule C, unincorporated small business, where the proprietor goes to least age 50 and the net earnings in 2014 is $200,000:

One computes the Area 1402(a)( 12) Deduction, which reduces the number to $184,700. Following one utilizes Schedule SE to compute FICA and also Medicare Tax, which totals $19,864.30. Fifty percent of this is $9,932,15, and also is subtracted from $200,000. The result is $190,067.85 of Self-Employment Income. The optimum Worker Salary Deferment payment is $17,500 plus $5,500 or $23,000. If one takes 20 percent of $190,067.85, the optimum employer profit sharing payment is $38,013.57. The overall of both payments is $61,013.57. One can not exceed the complete limitation of $57,500. Keep in mind: a detailed worksheet for this calculation can be located in Internal Revenue Service Publication 560. On the other hand, the contribution limit for a STRAIGHTFORWARD IRA plan would certainly be $20,035.96 or $38,013.57 for a SEP IRA strategy. One can contribute considerably even more to a Solo 401(k) instead of these various other two company IRA plans, as well as certainly far more than the $6,500 limitation for a traditional specific IRA plan.

Target dates: One should develop your Solo 401(k) plan by December 31, 2014, if you wish to make a payment for tax year 2014 and also decrease gross income. The contributions need to be moneyed by your tax-filing due date. If one apply for the 6-month extension prior to the April 15, 2015 deadline to file one's 2014 income tax return, one would have up until October, 15, 2015, to make the cash money contribution.


The Solo 401( k) is not a brand-new type of 401( k) plan as well as has the very same guidelines as well as requirements as any various other 401( k) strategy. The company proprietor wears two hats in a 401( k) strategy: employee as well as company. If the individual is age 50 or over, there can be an extra $5,500 "catch-up" payment, making the complete maximum contribution to the Solo 401( k) intend $56,500 for 2013 and $57,500 for 2014.

One can contribute considerably more to a Solo 401(k) instead of these various other 2 employer IRA strategies, and also certainly much even more than the $6,500 restriction for a conventional private IRA strategy.

Target dates: One must establish your Solo 401(k) strategy by December 31, 2014, if you desire to learn more make a payment for tax year 2014 as well as minimize taxed income.