Absolutely amazing and love your quick yet super concise and clear delivery of the information. No filler, no waste, just pure gold. Appreciate you Travis.
Hello, wanted to tell you that your explanations is the best on YT! You explain everything very clearly, easy and sense making. You helped me to calculate my contributions , honestly, I wasnot able to do it without you. Thank you!!!!
Irs says no voluntary contribution with s corp profits. That right? So s corp limits roth contributions unless you pay yourself near the social security cap?
Hi Travis. If I want to put everything in the traditional side can I do an employee deferral + profit sharing contribution + non deductible contribution all to the traditional side. In your scenario you advise to increase the W2 income so our 25% profit sharing is higher, but isn't it easier to just do the non deductible contribution to the traditional side? Increasing the W2 wages means higher self employment tax, but we would also receive a higher deduction on the business side with a higher profit share. Not sure which would be best. I hope this makes sense. Thank you!
Good information! However, I am not following the third type of contribution. Why are you recommending placing the third type of an after tax contribution first being placed into a traditional Solo 401K and then immediately converting it to a Roth? Why not just put it directly into a Roth? I have listened to other video where there are limits for high income earners but the income you are outlining wouldn't be affected by these limits but you are still recommending this backdoor approach over a direct Roth contribution. What is the need or benefit for it?
@@TravisSickle So, non-deductable contributions must be made to Traditional Solo 401K? But this third contribution is made as the Employee rather than the Employer, correct?
@@TravisSickle Clairfying this is an Employee contribution to bridge the difference between the Employer contribution limit and the Max overall contribution limit?
Travis, thank you for the video. I have a question for you. I made my first 2021 non-deductible IRA contribution, $7K, on 4/15/22. The amount is sitting in money market with Fidelity. I earned $114.89 interest and now the account has $7114.89. From your video, I learned that I can convert this non-deductible IRA to ROTH IRA, correct? What do I do with my interest earning? Do I have to pay tax on this conversion?
Thanks for the info. 1. With the laws changing, is this strategy still applicable in 2024? 2. Can one amend the prior year taxes to achieve the same outcome? 3. Can the strategy be applicable if one has solo business or single member llc? Thanks again.
In a S-Corp, if made my W2 - $20,500 and then deferred the whole amount, my taxable personal income would be $0. Would I then be able to also business expense the profit-sharing match of $5125, which is 25% of $20,500? Am I thinking of this in the right way? I see $25,125 as wages and employer contribution which would reduce my S-Corp Net Income and my personal income would be $0 because of my elective deferral.
Hello Travis, thanks for the explanation. But I have one question on the numbers. You were using 0.92935, but do you mean the 7.65% employer part of the social security and Medicare tax? If so, then should the number be 0.9235? I think your calculation is using 7.065% Thank you
Second half of self employment tax... 100x.0765=7.65 then 100-7.65=92.35 then 92.35x7.65=7.0648 and finally 100-7.0648=92.935 Which is the same as taking your net profit minus the deductible portion to your self employment tax found on schedule SE.
@@TravisSickle thank you so much for the explanation. You have solved me a lot of retirement plan related questions. I even used one of your videos as a teaching material to my group of people because your explanation was clear and easy to understand. Wish you all the best and keep updating.
If my payroll is 162,000 on my Scorp to be able to contribute the max amount to my solo 401k, aren’t my federal tax deductions on my 401k contributions offset by additional payroll taxes?
That’s only if you want it 100% deductible. You can still apply the same strategy in this video. Just multiple the 25% of w2. Max employee side and then the difference as a backdoor roth.
As a sole proprietor, what counts as salary for the 20%? Does the 30k(over 50) contribution count towards salary or does it get taken off salary and 20% of that number?
Hi Travis. I have a W-2 form and also am an independent contractor as a personal trainer in NYS. Am I still eligible to apply for solo 401k? If yes, would opening a solo 401k require a tax professional to do so?
@@TravisSickle I am just looking for clarity. such as is this back door contribution made as an employer or emploee contribution. This is a limit to what can be contributed but if you have investments can you used investment $ to reach the max limit or must or is this limited by you earned income. How does Secure Act. 20. effect this strategy.
hello Travis, if a schedule C business has operating loss before the owner makes any solo k employee contributions this year, can he still make the solo K employee contribution for that year?
thx. So for a schedule c owner, it make sense that not to do monthly contributions since there is a chance that he might end up with loss in that year, therefore, no contribution is allowed?
@@TravisSickle This is a problem I have been seeking an answer to for some time. My LLC lost money on tax return after a significant amount of deductions, but I still had enough cash flow to pay myself a steady income. Why don't they allow us to invest for retirement with business cash flow? I still had income, just deductions offset the tax liability. Is there a solution for this other than getting to the green which is obviously the goal for everyone in business or should I say most people.
Yes, but the employee side is a deferral of contributions. It’s not a double deduction…if that’s what you may be thinking. On the w2, you’ll see a reduction on the taxable portion, if you’re contributing to the traditional side (vs Roth).
Can you do the entire 61k as the non-deductible backdoor and convert to Roth if all done in solo 401k plan or do you have to do the 20,500 Employee Contr. First?
I have LLC and file as s Corp. I took a paycheck every month. Do I have to state something in paycheck for employee side contribution? Can I just Amend W2 with my contribution amount?
@@TravisSickle currently, I haven't made any contributions from my paycheck and some articles says I have to make it by December 31st from paycheck and others say that's not true. I can do it in January and amend W2. I'm not sure which one is correct.
@@RealShaktimaan you have to setup the plan by 12/31 to get the employee side contributions but those can be made up to Jan 31st. Just get the paperwork done by 12/31.
@@RealShaktimaan I added to this blog the other day to show exactly where the rules are on these deadlines because most blogs are technically correct but don't tell the whole story...www.theincrediblepenny.com/solo-401k-contribution-deadlines/
@@TravisSickle what does it mean by "The employee solo 401k contribution will show on your w2 and therefore needs to be elected by 12/31" and how to do that exactly?
Thanks for the videos. I am 52 and self employed with a sole proprietor Llc and I want to put as much into retirement as possible. I also want to withdraw 50k to 60k in 6 years so I was thinking of doing a Roth IRA so that would not be taxed on withdrawal. I would like to know your opinion and I still don’t understand how much I can contribute if I do both. If I make $84,500 can I contribute $8,000 to the Roth and $76,500 to the solo 401k? Thanks
Hi Travis and thanks for the video. I have a W2 job as well as a sole proprietorship side hustle. I’ve contributed about 5k so far for the year toward my W2’s 401k. Can I discontinue contributing toward that 401k and put the remaining of the 22.5k into a solo 401k for 2023? TIA!
great question...yes. You don't even need to stop, you just can't go over the max of 22.5 combined as employee side. remember, that 22.5 is only employee side.
It depends how the LLC files...you can do it on a schedule C, which is what I did for this video. If you file as an S-corp, which you could as an LLC too, the math is a little different. In either case, the numbers are the same. The only difference is the plan compensation calculations. I have many videos with examples.
![How to calculate solo 401k contributions [Self Employed Retirement Plan]](http://i.ytimg.com/vi/CFGgHCpD0uw/mqdefault.jpg)
![Felix "Unfair" | [Stray Kids : SKZ-PLAYER]](http://i.ytimg.com/vi/Oswujxm2Ag0/mqdefault.jpg)
Absolutely amazing and love your quick yet super concise and clear delivery of the information. No filler, no waste, just pure gold. Appreciate you Travis.
Thanks so much!
Hello, wanted to tell you that your explanations is the best on YT! You explain everything very clearly, easy and sense making. You helped me to calculate my contributions , honestly, I wasnot able to do it without you. Thank you!!!!
Love the math calculation 🧮 break down Travis 👍🏿
Thanks so much for your videos Travis. They are extremely helpful and informative.
Glad to hear it!
Irs says no voluntary contribution with s corp profits. That right? So s corp limits roth contributions unless you pay yourself near the social security cap?
I am researching where should I open a solo 401K account now. Can you please recommend me or which company you're using?
Hi Travis. If I want to put everything in the traditional side can I do an employee deferral + profit sharing contribution + non deductible contribution all to the traditional side. In your scenario you advise to increase the W2 income so our 25% profit sharing is higher, but isn't it easier to just do the non deductible contribution to the traditional side? Increasing the W2 wages means higher self employment tax, but we would also receive a higher deduction on the business side with a higher profit share. Not sure which would be best. I hope this makes sense. Thank you!
Does anything change if you open an account with a C corp instead of an S CORP?
Good information! However, I am not following the third type of contribution. Why are you recommending placing the third type of an after tax contribution first being placed into a traditional Solo 401K and then immediately converting it to a Roth? Why not just put it directly into a Roth? I have listened to other video where there are limits for high income earners but the income you are outlining wouldn't be affected by these limits but you are still recommending this backdoor approach over a direct Roth contribution. What is the need or benefit for it?
Because you can’t, unfortunately.
@@TravisSickle So, non-deductable contributions must be made to Traditional Solo 401K? But this third contribution is made as the Employee rather than the Employer, correct?
@@TravisSickle Clairfying this is an Employee contribution to bridge the difference between the Employer contribution limit and the Max overall contribution limit?
Travis, thank you for the video. I have a question for you. I made my first 2021 non-deductible IRA contribution, $7K, on 4/15/22. The amount is sitting in money market with Fidelity. I earned $114.89 interest and now the account has $7114.89. From your video, I learned that I can convert this non-deductible IRA to ROTH IRA, correct? What do I do with my interest earning? Do I have to pay tax on this conversion?
Yes, you'll pay taxes on the earnings...Pro Rata rule.
Thanks for the info. 1. With the laws changing, is this strategy still applicable in 2024? 2. Can one amend the prior year taxes to achieve the same outcome? 3. Can the strategy be applicable if one has solo business or single member llc? Thanks again.
In a S-Corp, if made my W2 - $20,500 and then deferred the whole amount, my taxable personal income would be $0. Would I then be able to also business expense the profit-sharing match of $5125, which is 25% of $20,500? Am I thinking of this in the right way? I see $25,125 as wages and employer contribution which would reduce my S-Corp Net Income and my personal income would be $0 because of my elective deferral.
no, the max is 100% of plan comp or the $61k (2022).
Hello Travis, thanks for the explanation. But I have one question on the numbers. You were using 0.92935, but do you mean the 7.65% employer part of the social security and Medicare tax? If so, then should the number be 0.9235? I think your calculation is using 7.065%
Thank you
Second half of self employment tax... 100x.0765=7.65 then 100-7.65=92.35 then 92.35x7.65=7.0648 and finally 100-7.0648=92.935
Which is the same as taking your net profit minus the deductible portion to your self employment tax found on schedule SE.
The reason it’s so convoluted is because net profit is after your deductions but the profit sharing contribution is a business deduction.
@@TravisSickle thank you so much for the explanation. You have solved me a lot of retirement plan related questions. I even used one of your videos as a teaching material to my group of people because your explanation was clear and easy to understand. Wish you all the best and keep updating.
If my payroll is 162,000 on my Scorp to be able to contribute the max amount to my solo 401k, aren’t my federal tax deductions on my 401k contributions offset by additional payroll taxes?
That’s only if you want it 100% deductible. You can still apply the same strategy in this video. Just multiple the 25% of w2. Max employee side and then the difference as a backdoor roth.
As a sole proprietor, what counts as salary for the 20%? Does the 30k(over 50) contribution count towards salary or does it get taken off salary and 20% of that number?
net profit from self employment.
Hi Travis. I have a W-2 form and also am an independent contractor as a personal trainer in NYS. Am I still eligible to apply for solo 401k? If yes, would opening a solo 401k require a tax professional to do so?
You talk about the third part of this as the BACK DOOR to a Roth. What are the rules, or how do you handle this converstion to a Roth?
explain a little more on your question and I'll put it into a video.
@@TravisSickle I am just looking for clarity. such as is this back door contribution made as an employer or emploee contribution. This is a limit to what can be contributed but if you have investments can you used investment $ to reach the max limit or must or is this limited by you earned income. How does Secure Act. 20. effect this strategy.
hello Travis, if a schedule C business has operating loss before the owner makes any solo k employee contributions this year, can he still make the solo K employee contribution for that year?
no, you can only contribute to a retirement plan up to the maximum of your income.
thx. So for a schedule c owner, it make sense that not to do monthly contributions since there is a chance that he might end up with loss in that year, therefore, no contribution is allowed?
@@changxinqiao3648 sort of, it depends. But in general, if you don't have the income you can't save into a retirement plan.
@@TravisSickle This is a problem I have been seeking an answer to for some time. My LLC lost money on tax return after a significant amount of deductions, but I still had enough cash flow to pay myself a steady income. Why don't they allow us to invest for retirement with business cash flow? I still had income, just deductions offset the tax liability. Is there a solution for this other than getting to the green which is obviously the goal for everyone in business or should I say most people.
Are all of the contributions coming from the company's bank account considering you have roles both as employer and employee in a S corp? Thank you.
Yes, but the employee side is a deferral of contributions. It’s not a double deduction…if that’s what you may be thinking.
On the w2, you’ll see a reduction on the taxable portion, if you’re contributing to the traditional side (vs Roth).
The s-Corp employee side can’t be contributed for 2022. January 31st was the deadline for the w2.
Thank you
Can you do the entire 61k as the non-deductible backdoor and convert to Roth if all done in solo 401k plan or do you have to do the 20,500 Employee Contr. First?
@@andrewdecker5053 yes, you can do it that way.
I have LLC and file as s Corp. I took a paycheck every month. Do I have to state something in paycheck for employee side contribution? Can I just Amend W2 with my contribution amount?
Yes, the W2 will reflect the contributions. There are many ways to do it but yes amending it is one.
@@TravisSickle currently, I haven't made any contributions from my paycheck and some articles says I have to make it by December 31st from paycheck and others say that's not true. I can do it in January and amend W2. I'm not sure which one is correct.
@@RealShaktimaan you have to setup the plan by 12/31 to get the employee side contributions but those can be made up to Jan 31st. Just get the paperwork done by 12/31.
@@RealShaktimaan I added to this blog the other day to show exactly where the rules are on these deadlines because most blogs are technically correct but don't tell the whole story...www.theincrediblepenny.com/solo-401k-contribution-deadlines/
@@TravisSickle what does it mean by "The employee solo 401k contribution will show on your w2 and therefore needs to be elected by 12/31" and how to do that exactly?
Hello Travis. Thanks for all your videos. Question. I have a contract job each time, can I contribute in Roth 401K just on my own in Vanguard?
Yes
If my husband is also getting paid a w-2 from my LLC/S-Corp, can he contribute to the 401k as well? If so, how much?
How much is his w2 from scorp?
Thanks for the videos. I am 52 and self employed with a sole proprietor Llc and I want to put as much into retirement as possible. I also want to withdraw 50k to 60k in 6 years so I was thinking of doing a Roth IRA so that would not be taxed on withdrawal. I would like to know your opinion and I still don’t understand how much I can contribute if I do both. If I make $84,500 can I contribute $8,000 to the Roth and $76,500 to the solo 401k? Thanks
Essentially, yes…if you need more help, www.sicklehunter.com
Hi Travis and thanks for the video. I have a W2 job as well as a sole proprietorship side hustle. I’ve contributed about 5k so far for the year toward my W2’s 401k. Can I discontinue contributing toward that 401k and put the remaining of the 22.5k into a solo 401k for 2023? TIA!
great question...yes. You don't even need to stop, you just can't go over the max of 22.5 combined as employee side. remember, that 22.5 is only employee side.
video on your question... ruclips.net/video/oHoTs9Mx7rE/видео.html
@@TravisSickle can't open the link
If your business takes a loss on the year can you still contribute to your solo 401k?
July 14, 2023
What if you have a LLC
It depends how the LLC files...you can do it on a schedule C, which is what I did for this video. If you file as an S-corp, which you could as an LLC too, the math is a little different. In either case, the numbers are the same. The only difference is the plan compensation calculations. I have many videos with examples.