How to complete form 8881 for automatic participation feature tax credit?

Forum|Forum|2 years ago
March 8, 2024
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I am a sole proprietor with no employees and opened a solo 401K in 2023. I would like to file for the automatic participation feature tax credit ($1500 over 3 years). When I access the section for form 8881 it refers to Startup Costs. I am not trying to file for the Startup Costs tax credit as I don't have employees, just the automatic participation feature tax credit. Am I able to do this in TurboTax Premier Online?

TurboTax Premier Online

DaveF1006

It is a startup cost for setting up retirement plans for employees. You qualify to claim this credit if:

You had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year;
You had at least one plan participant who was a non-highly compensated employee (NHCE); and
In the three tax years before the first year you’re eligible for the credit, your employees weren’t substantially the same employees who received contributions or accrued benefits in another plan sponsored by you, a member of a controlled group that includes you, or a predecessor of either.

if you are a sole proprietor with no employees and prepare a Schedule c return ,you are not eligible for this credit. Please refer to this IRS link for more details. This is the same credit that you described as a automatic participation feature tax credit and is about startup costs.

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gpientkaAuthor

I was clear in my original question that I am NOT trying to take the startup cost credit in part I. I want to take only the Small Employer Auto-Enrollment Credit in part II. Turbotax premium online will not allow me to complete form 8881 Part II only. The IRA instructions for part II are clear that an eligible employer is different than for Part I. I do meet the criteria for part II. If I can't take this credit in TurboTax premium online I will have to complete my return and file elsewhere. Please advise.

T2019T

I would also appreciate an answer to this question. I have a solo 401k and am trying to claim the $500 auto-enrollment credit in Part II (NOT the startup costs credit in Part I). I have Turbotax Home & Business.