Self-Employed Solo 401k FAQ – Is there enough time to open a Mega Backdoor Roth Solo 401k for 2022?
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Solo 401k Question: Is there enough time to open a Mega Backdoor Roth Solo 401k for 2022?
Response:
Yes – per IRS Publication 560 (which is the landmark guidance for retirement plans for self-employed individuals, including solo 401(k) plans), it is clear the that as long as a Solo 401k plan is established by the end of the year (i.e. meaning that the documents are signed by the end of the year) that will preserve the right to make all types of contributions up until the business tax return deadline, including timely file extension.
For example, if one’s self-employed business is taxed as an S-corporation, then the business tax return deadline is March 15th (or September 15th if a timely extension is filed).
Practically, this rule makes sense because many self-employed individuals don’t know how much they’ve made until after the end of the year and of course, the ability to contribute to a plan is a function of one’s self-employment compensation.
