Solo 401k Contribution Rules – Do I need to deposit my employee contributions before year-end?

Question: I have a Solo 401k for my self-employed business.  My CPA has advised me that for 2016 I am eligible to make an $18,000 salary deferral (employee contribution) and $10,000 profit-sharing contribution (employer contribution).   Do I need to deposit my employee contribution before December 31, 2016? My CPA is not sure & when I Google the topic I find conflicting information.

Answer:Both the employee and employer contributions can be made by the due date of tax return for your self-employed business including timely-filed extensions.  This is confirmed in IRS Publication 560 which is the publication covering the rules for Solo 401k plans and other owner-only retirement plans.  Specifically, the chart titled “Key Retirement Plan Rules” on page 3 of Pub. 560 states that both employee and employer contributions can be made up until the tax return is due (including extensions).

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About George Blower

I have the privilege of educating our clients about our products and services so that they can make informed and confident decisions about their financial future. Prior to joining My Solo 401k Financial, I served as the general counsel for a subsidiary of a Fortune 500 financial services company. Learn more about George Blower and My Solo 401k Financial >>

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