QUESTION 1: I have a couple of questions regarding the solo 401k. Should I contribute to the 401k directly from my
sole-proprietorship as an expense or as owner earnings - or do I pay
myself from the business account as owner earnings and then contribute from my
personal account?
ANSWER: Contributions to a solo 401k are
based on earned income. When the employer is a sole proprietorship, the earned
income will be based on line 31 of schedule C. This is the starting figure. You
then have to subtract 1/2 of self-employment tax. Our solo 401k on-line calculator will perform this calculation for you. You then make the sol401k
contribution from the business account or your personal bank account as long as
it is calculated as stated above.
QUESTION 2: Also, are any of the related expenses for the solo401k considered a
business expense and be paid by the business or are they all my personal
responsibility?
ANSWER: Solo 401k expenses do not qualify
as a business expense. Click here to learn more.
All the
best,
Sarah in
Maryland
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