Solo 401k Accountant |Solo 401k Contribution Question

QUESTION: Quick question about salary deferral versus profit sharing contributions to the self-directed solo 401k plan.  Is it accurate to say that I personally fund the salary deferral contribution and that my business funds the profit sharing component? Does it matter? In other words, should I use a personal check to make the salary deferral contribution and use my business check to make the profit sharing contribution? Following is my accountant’s email below.

Here’s my accountant’s question regarding the Solo 401k contributions:

In big company plans, the salary deferral amount is paid by the person.  The profit-sharing portion is paid by the company….but I’m not sure about solo 401(k)….I’m not sure it’s really going to matter if we get the end result that we want…but, is there someone (a human being) to talk to?  KH

ANSWER: Since the self-employed individual serves both roles (i.e., employee and employer) when participating in a solo 401k plan, it doesn’t matter where both contributions are funneled from. The key is to base both contributions on self-employment income from the business for which the Solo 401k was established.  Please feel free to have your accountant call me with any questions pertaining to solo 401k contributions or self-directed solo 401k plan investment questions.

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 >>


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