Form 1099-NEC For Self-Employment Income for Opening a Self-Directed Solo 401k and Making Contributions

For tax year 2020 and future years, compensation paid to independent contractors will need to be reported on Form 1099-NEC.  For prior years Form 1099-R MISC was used to report compensation paid to independent contractors.

This new Form 1099-NEC  requirement will indirectly impact existing solo 401k participants and those planning to open a solo 401k plan in that they will now base their solo 401k self-employment income eligibility requirement on the new form instead of Form 1099-MISC.

By way of background, in order to participate in a solo 401k the individual must be self-employed  through a formal entity such as an S-corporation, LLC, Partnership, etc., or as an independent contractor.

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About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

6 Comments

  1. Posted August 21, 2021 at 2:14 am | Permalink

    Thanks for the information, I have a question though.
    I have a single member LLC, Can I open for my spouse a solo 401k if she gets 1099 nec from my LLC , or she has to have a W2 ?

  2. Posted January 30, 2022 at 12:25 am | Permalink

    Can income from a 2021 1099-Misc form, as well from a 2021 1099-NEC form be contributed to a solo 401K? The 1099-Misc relates to 2021 income from an employer that I retired from in 2020.

  3. Posted March 13, 2022 at 12:43 am | Permalink

    I am a 1099-NEC (Freelancer or independent contractor). Can I open a solo 401K. If yes. What form do I report this contribution and what is the max amount I can contribute.
    Thanks.

  4. Posted April 14, 2022 at 4:06 pm | Permalink

    I receive 1099-NEC as the sole earned income and are very interested in putting the income into the self employed 401K to reduce the Adjusted Growth Income (AGI) on the next year tax return.
    1. Am I eligible for the self-employed 401K ?
    2. Do I have to setup (open) a sole proprietorship (with a separate tax ID) for this ? I currently get paid to my name and SS#. I read somewhere, that it is ok using my mane and SS# without a sole proprietorship as long as the 401K account has less than $250K.
    Thanks.

  5. Posted April 15, 2022 at 12:48 am | Permalink

    I’m the owner of my LLC, no employee, I have 1099-NEC, can I have solo 401k? I heard only W-2 works, not 1099-NEC, is that true? Thank you

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