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).