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Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:07 pm
by rduinvestor
My SO has a Solo 401K (this is our first year of having it). I believe the deadline for 2020 contributions for both employer and employee contributions is when she files her taxes in 2021.

Can someone with a solo 401k validate that is correct? I have been on hold with e-trade for 45 minutes and have a 91 minute chat wait time..


Happy Holidays!

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:22 pm
by MishkaWorries
There is a lot of confusion on this point. I don't know about ETrade but this is what TDAmeritrade says:

"Solo 401(k) important dates and deadlinescalendar
In order to make a contribution for this year, you must establish your Solo 401(k) plan by December 31, 2020 and make your employee contribution election by the end of the calendar year. Keep that election in your 2020 tax files. Unless your business is incorporated, you can make the contribution once you have calculated your net business income for the year, but no later than your tax filing deadline including extensions. Employer profit-sharing contributions can also be funded up until your tax return due date, plus extensions."

To be on the safe side I already made my EmployEE contribution for 2020.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:29 pm
by rduinvestor
I found that as well and I also found it confusing...
In order to make a contribution for this year, you must establish your Solo 401(k) plan by December 31, 2020 and make your employee contribution election by the end of the calendar year
That makes it seem like you have to do it by year end.
Unless your business is incorporated, you can make the contribution once you have calculated your net business income for the year, but no later than your tax filing deadline including extensions. Employer profit-sharing contributions can also be funded up until your tax return due date, plus extensions.
My SOs business is an LLC.. So that second line makes it sound like I can do both employee and employer contributions by tax return due date.. However, I can't actually find the official answer on the IRS website either.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:30 pm
by formerlybroke
Post dated 11/8/20:

“ While the 2019 SECURE Act extended the deadline to adopt a Solo 401k plan from the end of the year to the business tax return deadline including any timely filed extension, the IRS has not yet updated its prior guidelines stating that employee contributions must be elected by the end of the year.

Therefore until the IRS issues final guidance, the conservative approach is to adopt the plan by 12/31/2020 to ensure that both employee and employer contributions can be made for 2020 in 2021 by your business tax return plus extension.”

From: https://www.mysolo401k.net/the-solo-401 ... -deadline/

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:32 pm
by glocklt4
MishkaWorries wrote: Wed Dec 30, 2020 12:22 pm There is a lot of confusion on this point. I don't know about ETrade but this is what TDAmeritrade says:

"Solo 401(k) important dates and deadlinescalendar
In order to make a contribution for this year, you must establish your Solo 401(k) plan by December 31, 2020 and make your employee contribution election by the end of the calendar year. Keep that election in your 2020 tax files. Unless your business is incorporated, you can make the contribution once you have calculated your net business income for the year, but no later than your tax filing deadline including extensions. Employer profit-sharing contributions can also be funded up until your tax return due date, plus extensions."

To be on the safe side I already made my EmployEE contribution for 2020.
Agree this is confusing... My wife also has a Solo Traditional 401k and Solo Roth 401k with TD Ameritrade, and I read that same paragraph. I believe the "election" is a notification to your "employer" (yourself) of how much you intend to contribute for 2020, but that election notification is never reported anywhere. They don't mention a form or any details on this, and when I did a chat the person incorrectly told me that the election and contribution must be made by 12/31. It clearly states here that the contribution can be made by tax filing, which makes sense because you don't really know what you can contribute yet.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:34 pm
by formerlybroke
rduinvestor wrote: Wed Dec 30, 2020 12:29 pm I found that as well and I also found it confusing...
In order to make a contribution for this year, you must establish your Solo 401(k) plan by December 31, 2020 and make your employee contribution election by the end of the calendar year
That makes it seem like you have to do it by year end.
Unless your business is incorporated, you can make the contribution once you have calculated your net business income for the year, but no later than your tax filing deadline including extensions. Employer profit-sharing contributions can also be funded up until your tax return due date, plus extensions.
My SOs business is an LLC.. So that second line makes it sound like I can do both employee and employer contributions by tax return due date.. However, I can't actually find the official answer on the IRS website either.
Mine is LLC filing as S and always have done EE and ER contributions by end of calendar year FWIW.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:36 pm
by sohcahtoa
rduinvestor wrote: Wed Dec 30, 2020 12:29 pm I found that as well and I also found it confusing...
In order to make a contribution for this year, you must establish your Solo 401(k) plan by December 31, 2020 and make your employee contribution election by the end of the calendar year
That makes it seem like you have to do it by year end.
In case Spirit Rider or another expert isn't along quickly, the key word is election. You must write (and keep in your files) a deterministic election of how much of your employee wages you will defer. Here is a template from Schwab: https://www.google.com/url?sa=t&source= ... 9349710878

You then have until your filing deadline, including extensions, to actually make the contributions.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:49 pm
by glocklt4
sohcahtoa wrote: Wed Dec 30, 2020 12:36 pm
rduinvestor wrote: Wed Dec 30, 2020 12:29 pm I found that as well and I also found it confusing...
In order to make a contribution for this year, you must establish your Solo 401(k) plan by December 31, 2020 and make your employee contribution election by the end of the calendar year
That makes it seem like you have to do it by year end.
In case Spirit Rider or another expert isn't along quickly, the key word is election. You must write (and keep in your files) a deterministic election of how much of your employee wages you will defer. Here is a template from Schwab: https://www.google.com/url?sa=t&source= ... 9349710878

You then have until your filing deadline, including extensions, to actually make the contributions.
Yep, this is my understanding as well, however we have never filled out a form with TD Ameritrade.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 12:50 pm
by rduinvestor
Thanks. That is helpful.
I can't find the same form for e-trade, but will keep looking.

Since our goal is to invest 100%, assuming we find the same form for e-trade, we can just specify that it is 100% election deferral and then we have until tax time to actually calculate what that amount is.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 1:01 pm
by Katietsu
rduinvestor wrote: Wed Dec 30, 2020 12:50 pm Thanks. That is helpful.
I can't find the same form for e-trade, but will keep looking.

Since our goal is to invest 100%, assuming we find the same form for e-trade, we can just specify that it is 100% election deferral and then we have until tax time to actually calculate what that amount is.
There is no form FOR E*trade, Schwab or anyone else. As a service, Schwab, appears to have provided a template. This “paperwork” is kept in your files. You are the employer. You can scribble your desire to contribute $19,500 on the back of a napkin, sign it and date it before the end of the year. I am using a bit of hyperbole here to make my point. Note that this is referring to your employee contribution only. The employer contribution is a separate issue.

Bottom line. You can print the form from the Schwab site linked above. Fill it out and sign it before the ball drops. Put it in your filing cabinet. Wait until you have your new account number, or online access, and make your contribution.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 1:04 pm
by sohcahtoa
rduinvestor wrote: Wed Dec 30, 2020 12:50 pm Thanks. That is helpful.
I can't find the same form for e-trade, but will keep looking.
There may not be one, but it doesn't have to match your custodian. It is not filed with ETrade, it is simply kept in your records.
Since our goal is to invest 100%, assuming we find the same form for e-trade, we can just specify that it is 100% election deferral and then we have until tax time to actually calculate what that amount is.
This will work. Here is a previous thread with a Spirit Rider reply: viewtopic.php?t=174310

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 1:23 pm
by glocklt4
Thanks for the link, sohcahtoa.

Do you ever have to turn in these forms? I mean, yes, you should do this, but what if you forgot in the past or lost them? It seems like only a formality.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 1:30 pm
by sohcahtoa
glocklt4 wrote: Wed Dec 30, 2020 1:23 pm Do you ever have to turn in these forms? I mean, yes, you should do this, but what if you forgot in the past or lost them? It seems like only a formality.
My understanding is that the employee deferral election would only be "turned in" during an audit. They are a formality, in the same sense that all receipts and other documentation kept in your supporting tax files are formalities. Perhaps you will be the only one to ever see them, but you'll be very happy to have them if audited.

The vast majority of my Solo 401k knowledge has been gained from looking through Spirit Rider's post history. I highly recommend reading through his contributions to other Solo 401k threads: search.php?author_id=717&sr=posts

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 1:35 pm
by rduinvestor
Quick thank you to everyone who hopped on and helped answer this question.

Re: Solo 401K Deadline Sanity Check

Posted: Wed Dec 30, 2020 3:58 pm
by FelixTheCat
Here's what I found
As long as you sign up for our Solo 401k by December 31, 2020, you will preserve the right to make Solo 401k contributions up until your business tax return deadline (including any timely filed extension) in 2021.
You can contribute Employer and Employee contributions. Use this link to determine how much https://obliviousinvestor.com/solo-401k ... alculator/