Does TurboTax not correctly calculate the maximum solo 401k contribution if you also have a W-2 employer 401k?

Forum|Forum|6 years ago
June 6, 2019
2 replies
0 views

I'm looking at either a SEP IRA or a solo 401k plan to reduce taxes on the income I get from my single-member LLC side business (I also am a W-2 employee of a different company). I already max out my 401k contributions at my W-2 employer. Because the maximum employee contribution is aggregated across all 401k plans, I believe that for a solo 401k the only contribution I could make is the employer profit sharing amount, which would be the same as the maximum SEP IRA contribution (roughly 20% of the single member LLC income). However, when I run the numbers in TurboTax and select "maximize contribution" it says that for 2018 my max contribution to a solo 401k would have been substantially higher than the SEP IRA amount. It looks like it is ignoring the fact that I contribute to another 401k. Does TurboTax not correctly calculate the maximum solo 401k contribution if you have a separate W-2 employer 401k?

TurboTax Home & Biz Windows

Best answer by dmertz

You are correct, this is an unsupported calculation. Since you've already made the maximum permissible elective deferrals at your W-2 employer, you can only make an employer contribution to the solo 401(k). To allow TurboTax to calculate only the maximum permissible employer contribution you must select the Maximize box for either a Profit Sharing Keogh or a SEP contribution. The result will be the same as for an employer-only contribution to the solo 401(k).

dmertzAnswer

Employee

JP21

Employee

Where can I select Max box for only the Profit Sharing Keith or a SEP contribution? I only have one box that is maximize the 401K contribution.

Onefish

The TT SEP calculation is doing something wrong, I think. (More likely operator error, but bear with me.)

I've gotten as far as checking the box to maximize my SEP contribution. But the answer that pops up is several thousand dollars more than the net income from self employment on Sch. C before calculating the SEP. So I used a worksheet I found online and came up with what appears to be the correct amount. I manually entered the amount I manually calculated but when I did a smell test the greater maximized account was entered on Schedule 1.

Vot gifs, captain? (Only the elderly will remember the Katzenjammer Kids. )

RobertB4444

I liked the Katzenjammers. But Li'l Abner was my jam.

The maximum SEP contribution is 25% of your net income from self-employment. You said that the contribution was several thousand dollars more than the net income from your schedule C. That means that the program thinks that something else is self-employment income and is taking it into account when figuring the contribution. You need to figure out what else has been entered as self-employment income and correct it.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

astro46

I am having similar doubts about how turbotax is dealing with sep/simple/roth deductions.

i tried to enter a roth and it tells me it isn't allowed, since there is no earned income, even though it has the schedule C and earned income entered on 1040, along with self employment tax. but then in the in the form view, the Roth amount is listed.

when I tell it to maximize SEP and then enter a Simple amount $3000 more than the $2420 part time income, it tells me I can contribute $500 more. . So I try that, and again, tells me the maximum is $500 more. On and on.

It also mentions the employer match, though not whether this is intended at part of the entered amount or in addition.

the keogh/SEP worksheet shows a maximum allowable Simple amount of 16,500, though the IRS site

IRA tips for sole proprietor

clearly states than Simple contribution can't be more than earned income plus $3000 catch up.

I don't have a good feeling about this.