Question

solo 401K roth contribution entry in turbotax

Forum|Forum|2 years ago
March 9, 2024
1 reply
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i am a sole proprietor with a solo 401K. I contribute to the solo401K via employee deferrals and to my roth solo 401K via employer contributions. When I enter the roth solo 401K employer contributions in turbo tax, it appears to be taxing me a second time on the income. It has already calculated my income tax and appears to be treating this contribution as a conversion of formerly tax deferred contributions. Please help.

TurboTax Premier Online

D

dmertz

Employee

Unless the employer contribution is larger than the permissible elective deferral, it would have been far easier if part of the employee contribution was Roth and the employer contribution was entirely traditional.

Roth employer contributions to your individual 401(k) are only permitted if your 401(k) plan agreement has been updated to permit such contributions.

The IRS has not yet provided guidance on how employers are to report Roth employer contributions to qualified retirement plans. However, if the one is to take a hint from how the IRS says Roth SEP contributions to be reported, one might guess that employer contributions to the designated Roth account in the 401(k) will need to be reported as a regular deductible employer contribution to the traditional 401(k) account followed by an In-plan Roth Rollover of that amount (without regard to any after-tax funds the employee might have in the traditional account), with the IRR reported on a Form 1099-R for the year in which the deposit to the designated Roth account occurs. The consequence of this would be that taxable income would be reduced in the year for which the contribution is made and is increased by the same amount in the year that contribution is deposited.

K

kkbachAuthor

you are amazing. Thank you so much. This is kind of what I thought and I so appreciate the validation. The employer contribution (I'm the employer, of course) is greater than the employee (which is 30,000 in my case as over 50). So it seems I'm faced with just not entering the employer contribution into turbo tax if it is roth solo 401K as it doesn't process it correctly. Thank you so much.

D

dmertz

Employee

I might consider entering it as a traditional employer contribution just to allow TurboTax to do the calculation to verify that it doesn't exceed the maximum permissible employer contribution, then remove the employer contribution.