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Reporting Employer Roth Contributions for a Self-Employed S-Corporation
If you operate your business as an S-corporation and have set up a solo 401k plan that allows Roth contributions, any employer Roth contributions need to be reported on both the employer and employee’s tax return.
While Secure Act 2.0 enacted at the end of 2022 authorized employer contributions to be made as Roth contributions, IRS guidance was needed with regards to how to report such contributions since previously employer contributions were always made as Roth contributions.
Per IRS Notice 2024-2, Roth employer contributions are reported as tax-deductible on the employer’s tax return for the year for which the contributions are made and then reported as taxable to the employee for which the contributions are deposited on a Form 1099-R.
For example, in the case of a self-employed person whose business is taxed as an S-corporation and receives $100,000 in w-2 wages from such business for 2023, such person could make an employer contribution up to 25% of the w-2 wages or $25,000 for 2023.
If such employer contribution was made as a Roth contribution for 2023 but deposited in 2024 by the business tax return deadline including timely extension, the contribution would be reported as a tax-deductible contribution on the employer return for 2023 (i.e. Line 17 of Form 1120-S) but as taxable to the employer for 2024 via Form 1099-R for 2024 (which would then be included in the Solo 401k owner’s taxable income reported on 2024 1040).
