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Old 01-16-2018, 12:46 PM
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Join Date: Jan 2018
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Solo 401(k) question

My wife is in the process of switching careers and is working for one place that withholds taxes and has a 401(k) plan in which she participates and in another where she is an independent contractor where she is paid an hourly rate with no taxes withheld. She's received a 1099-MISC for her income as an independent contractor. She contributes to the 401(k) but finished the 2017 tax year well below the maximum contribution limits.

My questions are (1) whether it's permissible to have a 401(k) and a solo 401(K) with contributions in the same tax year, provided those contributions combined remained below the 2017 limits and (2) if I opened a solo 401(k) account for her in 2018 for the 2017 tax year prior to submitting my tax return, would I be able to fund it with pre-tax dollars (i.e., even though she earned the money last year, would I be able to subtract the amount contributed in 2018 from the amount listed on her 2017 1099-MISC form)?

Thanks.
-Andy



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Old 01-20-2018, 08:46 AM
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Join Date: Oct 2010
Posts: 5,094
My questions are (1) whether it's permissible to have a 401(k) and a solo 401(K) with contributions in the same tax year, provided those contributions combined remained below the 2017 limits and===========>CORRECT; AS YOU SAID, it is possible to fund both a Solo 401k and a traditional 401k at the same time.Digging into your specifics, however, requires some qualification. The rules admittedly can get a bit more involved, but in general your elective contributions are capped based on individual limits and not by plan, meaning you will not be able to double your contributions because you have two plans.



(2) if I opened a solo 401(k) account for her in 2018 for the 2017 tax year prior to submitting my tax return, would I be able to fund it with pre-tax dollars (i.e., even though she earned the money last year, would I be able to subtract the amount contributed in 2018 from the amount listed on her 2017 1099-MISC form)?==========>>. No, you can only contribute to the solo 401k based on your net self-employment income, not your wife?s self-employment income. not from the amt listed on her 2017 1099 form.
However, you may qualify for a spousal IRA contribution based on her earned income. You can open spousal IRA ;for example
Like regular 401(k)s, the primary benefits of the solo 401(k) center on tax savings. If you open a traditional solo 401(k), the money you contribute will go in on a pre-tax basis; Sole proprietors deduct Solo 401k contributions for themselves on line 28 of Form 1040, U.S. Individual Income Tax Return. For a sole proprietor, pre-tax contributions (whether they?re employee or employer contributions) will be deducted on line 28 of Form 1040 under ?Self-employed SEP, SIMPLE, and qualified plans.?



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