Employee contributions to solo 401k after end of tax year

Submitted by landleviathan t3_11bdcgf in personalfinance

Hi folks. I seem to have gotten myself mixed up here and would like some clarification.

I'm a sole proprietor. My understanding from looking up the contribution rules for my Solo 401k was that I can make both employee and employer contributions for 2022 up to my 2023 filing deadline.

While double checking how to calculate my employer contribution max, I ran into this from ISR pub 560 (page 4): "Owner/Employees: The employee deferrals must be elected by the end of the tax year and then can be made by the tax return filing deadline"

I can't find a definition for 'elected' though.

So, can I still make employee contributions for 2022 or did I miss a step because they weren't 'elected' before the end of the year?

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avalpert t1_j9xf0ey wrote

You need to make a formal election as an employee, your 401k provider probably has a standard form or you can make your own but you need a written record as administrator noting the election.

And that election does need to be made by the end of the year so it is too late to make one for 2022. You can still make employer contributions though.

It is important to keep in mind that a Solo 401k is still a 401k, an employer-sponsored plan with plenty of regulatory requirements including record keeping. If you aren't paying someone to be the administrator, you are the administrator and it is your responsibility to know how those regulations apply to you or you risk having the entire plan disqualified.

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landleviathan OP t1_j9xfrew wrote

Replying to avalpert (#1,987,901)

Thank you for your reply! I am my own administrator - maybe I should reconsider that. So an administrator would have taken down that I was electing to make $X contribution for tax year 2022, and then given me a notarized document for my records so I could prove I'd made the election before year end?

If you have a suggestion for a resource on where I can read up on that kind of detail I would be really grateful.

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avalpert t1_j9yru8m wrote

Replying to landleviathan (#1,988,023)

It doesn't need to be a notarized document - just a signed form would do. Easy to draft, scan (or use an e-signature), and store electronically.

But accurate record keeping is the most critical part (including of your employer and employee contributions).

I'm sure you can ask your provider for whatever primer they have. It isn't difficult in the sense of being hard, but it does require diligence.

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