Spousal solo 401k salary deferral deposit deadlines

8 Replies

Spousal solo 401k salary deferral deposit deadlines - different than profit share deadline?

I am the sole proprietor and my wife is my employee. As the sole proprietor I understand my deadlines for making my contributions/deadline is the tax filing deadline

For the employer/profit share contribution to my wifes spousal contribution my understanding is the deadline for this is also the tax filing deadline.

However I have read two conflicting pieces of information when it comes to the employee salary deferral portion of the spousal 401k deposit deadlines.

Scenario 1 Employee Contribution deposit deadlines:

" both employee and employer contributions can be made up to the company’s tax return deadline"

"while employee and employer contributions may be extended until the company tax return deadline you will typically need to file a W-2 for your wages (e.g. an s-corporation) by January 31, 2018. The W-2 will include your wage income and any deduction for employee retirement plan contributions will be reduced on the W-2 in box 12. As a result, you should make your employee contributions by January 31, 2018 or you should at least determine the amount you plan to contribute so that you can file an accurate W-2 by January 31, 2018.

This contadicts with Scenario 2 in which I have read:

"Salary deferrals/elective must be deposited no later than the 15th business day of the month following the month of defferal.

They say the profit sharing contribution can be deposited until the tax filing deadline but salary deferrals must be deposited by the 15th of the following month.

I had just opened up a solo 401K at year end and am wondering if I can still have my wife/employee do contributions for this year or if it is too late for the deposit now that the 15th has passed...

Can anyone specify the rules regarding deposit timelines for the employee salary deferral portion of the spousal 401K contribution.

@Kade Hawkins

Whenever I find conflicting information, I try to get to the truth be referencing something published by the IRS. While the IRS doesn't always have a clear resource for each topic, you might find pages 14 and 15 of IRS publication 560 helpful: https://www.irs.gov/pub/irs-pdf/p560.pdf

@Kade Hawkins

A solo 401k is not subject to Department of Labor rules because a solo 401k is for owner-only businesses with no common-law employees. As a result the contribution deadlines are more favorable for a solo 401k. For example, as long as the solo 401k is set up/adopted by December 31, both the salary deferral and employer contributions can be made up until the due date of the self-employed business tax return plus any timely filed extensions. See the following chart found on page 3 ofIRS Publication 560- Retirement Plans for Small Businesses.

When looking at the chart, look at the row labeled “Defined Contribution Plan” as a solo 401k plan falls under this umbrella.

Assume solo 401K plan was set up year end 2017, spouse of sole proprietor receives a W-2, wage deferrals for the spouse's 401K contribution have not taken place during year 2017, ie. reported wages on 941 quarterly reports not reduced and nothing in box 12 of W-2.  How should this be handled on Form 1040 for 2017? Can contribution be deducted on line 28 of 1040? Or should W-2 be changed to show wages reduced by contribution amount (to be made by due date of return)?  

W-2 is issued by sole proprietor. Wife works for/with husband. 

@Pamela Smallwood

Why is a W-2 being issued instead of reporting the earned income from self-employment on  schedule C or Schedule K-1?

How is the other spouse reporting the self-employment income? Is he or she filing a schedule C?

Who did they open the solo 401k with?

Are both spouses listed on the solo 401k plan document?

sched C is filed for income from self-employment. Individual 401K agreement adopted for sole proprietor business. Spouse eligible to participate in i401k. No other employees. Spousal wages from sole proprietor business reported on W2

What does the Adoption Agreement list for "Definition of Compensation for Purpose of Allocations?"

That section most likely lists "Withholding" since the self-employed business is a sole proprietorship.

If the sponsoring business is a sole proprietorship, then contributions for both spouses would be based on either Schedule C income or the self-employment earnings line listed on line 14 of the K-1.

On the other hand, if the sponsoring business was an S-corp or LLC taxed as an S-corp, then the contributions would be based on W-2 wages.

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