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Self-employed 401k Question: My business is taxed as an S-corporation and I receive w-2 wages of $50,000 per year. Does my business need to show a profit in order for me to be able to make profit-sharing contributions?
The ability to make Solo 401k contributions is one of the top reasons that our clients set up accounts with us.
We field questions every day from our clients in terms of how much they can contribute, the deadline, etc.
With regards to this question, please note that the Solo 401k owner’s ability to make employee contributions as well as employer (profit-sharing) contributions is based on the W-2 wages that such person receives from the business.
For example, in this case the Solo 401k owner could make an employer (profit-sharing) contribution equal to 25% of your w-2 wages (i.e. $12,500).
For more information see: https://www.mysolo401k.net/solo-401k/solo-401k-contribution-limits-and-types/