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Elective Deferral to Individual 401K Plan

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Level 1
last updated ‎March 12, 2020 4:16 PM

I have a client that owns an S-Corp and has set up an individual 401K plan.  She earned $26,000 in w2 wages from her S-Corp.  She decided to make an elective contribution to her 401K plan of $17,000 and wrote a personal check so it does not show up as a reduction in her federal taxable wages on her w2.

She should be able to deduct the full $17,000 for tax purposes because it is less than her w2 wages.  When I enter the elective deferral in the Kehogh/SEP/Simples Contribution Worksheet, it calulates $0 for deductible contributions because it is not linking to the w2 wages.  It is calculating that she has no self employment income and determining that none of the contribution is deductible.

How do I get ProSeries to link the contribution to her w2 so that the $17,000 is being deducted.

 

Thanks,

Brian

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3 Replies 3
Highlighted
Level 14
last updated ‎March 12, 2020 4:16 PM

The $17K should reduce her Box 1 W-2 wages. There is no 1040 deduction for this.

I'm not even sure that the way she did this (writing a check) is allowed.


ex-AllStar
Highlighted
last updated ‎March 12, 2020 4:16 PM

if it is a solo 401K should be an expense on the 1120S side. if this is not a solo 401K I think the W-2 is wrong and the payroll tax returns would also be wrong.

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Level 12
last updated ‎March 12, 2020 4:16 PM

"When I enter the elective deferral in the Kehogh/SEP/Simples Contribution Worksheet"

Which is not the type of plan her "employer" set up and maintains, because you told us it is a type of 401(k).

"I'm not even sure that the way she did this (writing a check) is allowed."

It seems they confused the concept for the employer contributing the amount deferred by the employee, and the concept of self-employed contributing.

"if it is a solo 401K should be an expense on the 1120S side."

And it's still part of Expenses to the 1120S for 401(k), because the employer contributes by holding back part of the employee's Gross Wages. In other words, the amount is already part of payroll, and the employee didn't get to take it home. That's also why they don't write a personal check to the plan administration/retirement account management firm.

The plan type matters.

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