Solo 401k and its effect on w2, 1120S and 941

Forum|Forum|6 years ago
June 4, 2019
2 replies
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I have a S corp. For example my total wages are $48000 on which I pay social security and Medicare
I have contributed (through my S corp):
$ 30,000 - Elective deferral Solo 401K, of which
$ 12,000 - is employee contribution (profit sharing) and
$ 18,000 - is the Employer contribution (elective deferral).

How would my W2 reflect above contribution apart from entry on 12 D.?
My questions for the pros for W2 form are-
1. What should be the amount on Box 1
2. What should be the amounts on Box 3 and 5
3. What should be the amount on Box 12 D

Questions about 1120 S form
4. Line 17 is for the profit sharing plans etc… so should It show $12000?
5. What should be on Line 8 which is for salaries & wages, Should this amount be $30000

6. What should we report on Forms 941/940 related to solo 401K?
As per above example, do we report 30,000 on Form 941 Line 2, & 48,000 on Form 941 5a, 5c?

Please help in the above situation.

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dmertz

Employee

You are confusing the terms:

$18,000 is your elective deferral
$12,000 is your employer profit sharing contribution
$30,000 is the sum of your elective deferral and your employer contribution

Regarding your W-2:

Box 1 = $30,000
Boxes 3 and 5 = $48,000
Box 12 = code D, $18,000

Form 1120S should show:

line 8 [actually line 7 for officers of the company, see comments below] = $30,000
line 17 = $30,000

Form 941:

line 2 = $30,000
Lines 5a and 5c = $48,000

I'm not familiar with Form 940, so I will refrain from commenting on that.

andy-couriel

I am not sure that I agree with the amounts you show to be reported on the 1120S. These amounts should be:

Line 7- Compensation of officers- $48,000
Line 18- Pensions, Profit share, etc- $12,000

Even though the total expense is the same at $60k, the company’s expense is $48k for wages, and $12k in Employer contributions, the reduced amount of Officer Compensation could be deemed insufficient compensation of >2% shareholders.

AliciaP1

Box 3 on Form 940 should show ALL compensation paid to employees during the year regardless of other reporting (or taxable) limits. In the example in the original question, box 3 on the Form 940 would be $48,000. Then box 4 would be $18,000 and box 4c would be marked.

Box 3 total payments are defined by the IRS as:

Compensation, such as the following.

—Salaries, wages, commissions, fees, bonuses, vacation allowances, and amounts you paid to full-time, part-time, or temporary employees.

Fringe benefits, such as the following.

—Sick pay (including third-party sick pay if liability is transferred to the employer). For details on sick pay, see Pub. 15-A, Employer's Supplemental Tax Guide.

—The value of goods, lodging, food, clothing, and non-cash fringe benefits.

—Section 125 (cafeteria) plan benefits.

Retirement/Pension, such as the following.

—Employer contributions to a 401(k) plan, payments to an Archer MSA, payments under adoption assistance programs, and contributions to SIMPLE retirement accounts (including elective salary reduction contributions).

—Amounts deferred under a non-qualified deferred compensation plan.

Other payments, such as the following.

—Tips of $20 or more in a month that your employees reported to you.

—Payments made by a predecessor employer to the employees of a business you acquired.

—Payments to nonemployees who are treated as your employees by the state unemployment tax agency.

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Anonymous

Thanks for the specifics.

LindaS5247

A Solo 401(k)—is a One-Participant 401(k)—is a great way to save for retirement if you’re self-employed or own a business and don’t have any full-time employees. Contributions you make to a Solo 401(k) can be deducted from your self-employment income.

It acts and is treated like any other 401(k) plan. Essentially, this plan has the sole owner and sole employee making contributions to the same one plan. This means you will report the total amount (as sole owner and sole employee) contributed as an adjustment on Schedule 1, line 16.

Here’s how to enter your Solo 401(k) contributions in TurboTax (follow the Turbo Tax prompts to correctly enter you contributions):

Sign in to your TurboTax account
Open or continue your return if you haven’t already
Locate the search bar and type self-employed retirement plans (be sure to include the hyphen)
Select the Jump to link at the top of the search results
Answer Yes to the question, Did you make a 2022 self-employed retirement plan contribution? This is found on the screen Self-Employed Retirement Plans
Answer Yes to Did you contribute to an Individual or Roth 401(k) plan?
On the next screen, enter your Elective Deferrals and any Catch-Up Contributions you made in 2022
Enter your Employer Matching (Profit Sharing) Contributions for 2022
- Note: There's no Employer Matching box for Roth 401(k)s because any matching employee contributions are pretax
If you haven’t made all your contributions for the tax year and would like TurboTax to calculate your maximum contributions for the year, check the box next to Maximize Contribution to Individual 401(k) and Continue
On the Adjusting Self-Employment Income screen, enter any changes you'd like to make to your self-employment income as it’s been calculated by TurboTax (this is rare). Enter a positive number if you’re adding an amount, and a negative number if you’re subtracting
Select Continue
If you checked the box next to Maximize Contribution to Individual 401(k), you’ll see Your Self-Employed Retirement Deduction. This screen shows the maximum amount you can contribute to your Solo 401(k) for the tax year
Answer the questions on the following screens, until you reach Your Retirement Contributions. This is a summary of the contributions you’ve made to your Solo 401(k) during the tax year
- If this page shows an excess contribution, you must withdraw the amount listed by the plan due date or face a tax penalty from the IRS
- If this page shows an amount to contribute by plan due date, you can still contribute the amount listed to your retirement plan before you max out your contributions, provided the due date hasn't already passed.