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SEP IRA vs SE401(k) vs Profit sharing

Forum|Forum|6 years ago
April 16, 2020
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I am full time employed in a company ABC which has 401k benefit where i contribute and i also have LLC where i make income as well

question

- Am i allowed to have SE401(k) account maximizing contribution employer(LLC) + employee , while still having 401k via ABC

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Best answer by dmertz

Employee contributions are subject to an overall individual limit while employer contributions are subject to separate plan limits. You can maximize the employer contribution to the self-employed 401(k) but your employee contributions to the 401(k) at ABC and to your self-employed 401(k) combined for 2019 are limited to $19,000 plus, if age 50 or over, a $6,000 catch-up contribution.

TurboTax's Maximize function for an individual 401(k) does not support the case where you've also made employee contributions to another employer's plan. You can use the SEP Maximize function to calculate only the maximum employer contribution but you'll have to manually calculate and explicitly enter the employee contribution to the individual 401(k) such that you do not exceed the $19,000 (plus $6,000 catch-up) overall limit on employee contributions.

D

dmertzAnswer

Employee

Employee contributions are subject to an overall individual limit while employer contributions are subject to separate plan limits. You can maximize the employer contribution to the self-employed 401(k) but your employee contributions to the 401(k) at ABC and to your self-employed 401(k) combined for 2019 are limited to $19,000 plus, if age 50 or over, a $6,000 catch-up contribution.

TurboTax's Maximize function for an individual 401(k) does not support the case where you've also made employee contributions to another employer's plan. You can use the SEP Maximize function to calculate only the maximum employer contribution but you'll have to manually calculate and explicitly enter the employee contribution to the individual 401(k) such that you do not exceed the $19,000 (plus $6,000 catch-up) overall limit on employee contributions.

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ntz69831Author

great answer, thanks for clearing it up.

since SE401(k) is out of option for me, what would be difference in contribution via SEP IRA vs Profit sharing?

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dmertz

Employee

No difference in the amount of the (employer) contribution. There may be fewer restrictions on access to the funds in the SEP IRA. However, having money in a SEP IRA would make it impossible to do a nontaxable backdoor Roth.