More 2% shareholder S-Corp

[HOPE2]

Hi to all.

Sole shareholder of S-Corp who formed Nov 2023 his S-Corp and did not have W-2 for 2023 as a employee.

He had few 1099-NECs(Total $121000)  under his name and two 1099-NECs (Total $51200) under his S-Corp.

In 2023 around June he contributed $6000 on ROTH 401-K and $16500 on individual 401-k under  EMPLOYEE CONTRIBUTION ( I mean description on Vanguard transaction confirmation ) not under employer contribution.

How do I enter on his tax return, on S-Corp tax return or on individual 1040?

I think it should be under EMPLOYER CONTRIBUTION when I see Vanguard transaction confirmation ! Am I right?

 Any insight would be greatly appreciated.

[abctax55]

Kinda hard to have an "employee" contribution on an S corp return that doesn't have an "employee", isn't it?

[HOPE2]

Thanks for your help@abctax55

I mean, when a self-employed (1099) wants to contribute on Vanguard, discripto should be employee contribution or employer contribution?

[TaxGuyBill]

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@HOPE2 wrote:

I mean, when a self-employed (1099) wants to contribute on Vanguard, discripto should be employee contribution or employer contribution?

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It could be either one.  They called it an employee contribution and that is fine (and is probably better because it allows more flexibility for adding an employer contribution later).

[qbteachmt]

"He had few 1099-NECs(Total $121000)  under his name and two 1099-NECs (Total $51200) under his S-Corp."

Since an S Corp doesn't even get issued a 1099-NEC under most conditions, this person needs some guidance on how to use Form W9. Also, the 1099-NECs don't qualify as the only business revenue; these are the only customers whose payments to your client meet the reporting threshold. Did you ask about bookkeeping reports? 1099-K?

"In 2023 around June he contributed $6000 on ROTH 401-K and $16500 on individual 401-k under  EMPLOYEE CONTRIBUTION"

401(k) accounts require a Plan. There would be an employer Plan filed that qualifies there to be 401(k) accounts. That's different than when an individual establishes their personal IRA account; IRA accounts don't get established because of a plan.

"( I mean description on Vanguard transaction confirmation ) not under employer contribution."

And, as noted, an Employee contributes from payroll.

"How do I enter on his tax return, on S-Corp tax return or on individual 1040?"

I wonder if this already disqualifies the plan/account.

"I think it should be under EMPLOYER CONTRIBUTION when I see Vanguard transaction confirmation ! Am I right?"

You're no righter than they are right.

 "Any insight would be greatly appreciated."

Let's remember that 401(k) is based on earnings, so that's been violated. Even Solo 401(k) is based on earnings.

I think this might be a bit beyond your experience. Heck, even though I do a lot of benefit work, I would need to do a ton of research on this. Why not find a mentor?

The S Corp is already late filing, if that is what you are working on. There is time to fix 2023 for most things, even though it might result in some penalties. Some things might be fixable and moot, no penalty.

[HOPE2]

@qbteachmt Thanks but I totally could not understand.

[HOPE2]

@TaxGuyBill thanks your help.

For 2023 and 2024 client been working as a physician assistant and already announced to all employers do not issue 1099-NEC under my name for 2024. Around January 2024 he contributed on Roth 401-K and Solo401-K under his name for the year of 2024. (same description: 2024 employee contribution)

Since he will not have any 1099-NEC under his name, so we will not make any Sch C for him based on net income and consider solo 401-k as well, just he will have a W-2 from his S-Corp for 1040 and 1120-S , now I think he should cancel recent solo 401-K contribution under his name? Am I right?  

and run 401-k through the payroll because he wants to have a employee for 2024.

[TaxGuyBill · Accepted solution]

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@HOPE2 wrote:

Around January 2024 he contributed on Roth 401-K and Solo401-K under his name for the year of 2024. (same description: 2024 employee contribution)

now I think he should cancel recent solo 401-K contribution under his name? Am I right?  

and run 401-k through the payroll because he wants to have a employee for 2024.

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Yes.  Any 401k contributions for 2024 need to be through the S-corporation and the employee portion is processed through payroll.

[qbteachmt]

You didn't understand, so let me try this part, again:

The 401(k) account only exists because Vanguard would have required proof of a Plan. That Plan document is going to state if this was his Sole Proprietorship or his S Corp as forming (sponsoring) a Plan.

He can put money into Solo 41(k) amount as Sole Proprietorship. He is both an employer and his own employee as the S Corp. You need to find out whose Plan this is, to know whether or which parts were done right and which were done wrong. He might not need to remove any funds, because "employer" can make nonelective contributions.

Read this:

https://www.irs.gov/retirement-plans/one-participant-401k-plans

And you might need expert help for this. You will learn from that mentor.

[HOPE2]

@qbteachmt @TaxGuyBill @abctax55 @itonewbie @Just-Lisa-Now- and the other help us in this community.

I should tell you guys, you are the best.

[HOPE2]

Hi to all,  and @qbteachmt @TaxGuyBill @abctax55 @itonewbie @Just-Lisa-Now- @sjrcpa

Dear Esteemed Proseies Forum Members,

As the tax season draws to a close, I find myself deeply indebted to each and every one of you for your unwavering support and invaluable contributions to our discussions. Your collective expertise, dedication, and willingness to share insights have been instrumental in navigating the complexities of this taxing season.

In the spirit of academic camaraderie, I extend my heartfelt gratitude for your tireless efforts in elucidating intricate tax-related queries and providing thoughtful guidance. Your collaborative spirit exemplifies the essence of our esteemed community, fostering an environment conducive to learning and professional growth.

Through our collective endeavors, we have not only enriched our own understanding but also facilitated the empowerment of countless individuals grappling with tax-related challenges. Your selflessness and generosity in sharing knowledge reflect the highest ideals of academic excellence and camaraderie.

As we reflect on the culmination of another tax season, let us take pride in our collective achievements and reaffirm our commitment to upholding the principles of integrity, professionalism, and mutual support that define our forum.

In closing, I extend my deepest appreciation to each member of the Proseies forum for your unwavering dedication, collaboration, and support. Together, we have demonstrated the profound impact of collective knowledge and camaraderie in navigating the complexities of the tax landscape.

With sincere gratitude, 1000000000 thanks

[qbteachmt]

Oh, wow; thanks for coming back and making this update.

How'd it go for your taxpayer in this topic? I'd like to know what transpired based on what you learned here.