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December 25, 2019
Question

I contributed $6k to company 401k b4 becoming SE. I have a solo 401k plan. TT is only letting me deduct the elective of $19k? not 20% of SE net non-elective? Why?

  • December 25, 2019
  • 1 reply
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1 reply

Employee
December 26, 2019

The TurboTax individual 401(k) Maximize function is unable to handle the situation where you also made elective deferrals or Roth contributions to the 401(k) plan of another employer as you have done with the $6,000 contribution.  You'll need to calculate your maximum permissible elective deferral to the individual 401(k) yourself, enter that explicitly, then, to allow TurboTax to calculate the employer contribution to the individual 401(k), mark the Maximize box for a SEP contribution or for a Keogh Profit Sharing contribution.

 

Note that as you are presently doing by marking the Maximize box for an individual 401(k) contribution, if TurboTax is not calculating any employer contribution it means that your net earnings from self employment is insufficient for you to make an employer contribution.  TurboTax uses the worksheet in chapter 5 of IRS Pub 560 to allocate your net earnings from self-employment first to elective deferrals, next to the employer contribution, then, if you are age 50 or over, to the catch-up elective deferral.  Also note that when you reduce your regular elective deferral to the maximum $13,000 permissible after taking into account the $6,000 contributed at the other employer, your net earnings from self-employment might be sufficient to permit an employer contribution.