www.solo401k.com - An Overview

Is a solo 401( k) far better than a SEP Individual Retirement Account?

I such as SEP IRAs and have actually recommended them to particular clients. Like the solo 401( k), you can contribute up to $52,000 right into a SEP IRA per year, but your earnings should be considerably higher to get to that level of financing.

Her organisation revenue, or internet Arrange C, last year was $130,000. If Jill were to open a SEP Individual Retirement Account to conserve via her business, the IRS would make her use the complying with calculation:

( Internet schedule C - 1/2 of self-employment tax obligation) x 20% =

If Jill were to open a solo 401(k), she could contribute $17,500 for herself plus the $24,241.96 for profit sharing (exact same quantity as SEP above) and also include the $6,500 catch up stipulation because she is over 50. That is a total amount of $48,241.96 in the Solo 401(k) as well as only $24,241.96 for a distinction of over $24,000!

For someone around that earnings level, the solo 401(k) can truly assist delay even more money. Solo 401(k)s additionally enable proprietors to open up a Roth 401(k). Currently, there is no Roth SEP. When you have a balance of over $250,000 in your Solo 401(k), you are required to submit a type 5500 EZ every year.

What entities can establish a solo 401(k)?

Sole proprietorships, Collaborations, companies, as well as llcs can all establish up solo 401(k)s. If your company is a corporation, you need to pay yourself W2 earnings to be able to contribute to a solo 401(k).

When must I develop a solo 401(k) plan?

Occasionally, I do not meet individuals till the year is over as well as it is too late to establish a solo 401(k) strategy. Both the SEP as well as solo 401(k) enable you to make large payments when you have the revenues in one year and do not require payments if you have lean years.

How do I determine my self-employment tax obligation?

The most convenient means is to submit Arrange SE with your 1040 or utilize a self-employment tax obligation calculator.

What else should I recognize?

Solo 401(k)s are made for companies where there is just one person functioning in the company. Some of the regulations connected to solo 401(k) plans can be learn more intricate.


Like the solo 401( k), you can contribute up to $52,000 right into a SEP IRA per year, however your income has to be substantially greater to get to that level of financing. If Jill were to open a solo 401(k), she might add $17,500 for herself plus the $24,241.96 for profit sharing (exact same quantity as SEP above) and also add the $6,500 catch up arrangement due to the fact that she is over 50. Solo 401(k)s likewise permit owners to open up a Roth 401(k). Both the SEP and solo 401(k) enable you to make large contributions when you have the earnings in one year as well as do not require payments if you have lean years.

Solo 401(k)s are developed for services where there is just one person functioning in the business.