Guide to Gusto Payroll Integration with My Solo 401k Financial: S-Corp, C-Corp, LLC, W-2 Solo 401k Contributions

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For self-employed solopreneurs, integrating Gusto payroll service with My Solo 401k Financial offers a powerful way to streamline and simplify the process of reporting contributions. This step-by-step guide is tailored specifically for solopreneurs operating as S-Corps, C-Corps, LLCs, or otherwise reporting their self-employment income on a W-2 via Gusto.

Key Concepts for Reporting Solo 401k Contributions

Before diving into the step-by-step guide, it’s essential to grasp some key concepts that will help you understand the purpose and objectives of this integration process. As a solopreneur, accurately reporting your Solo 401k contributions through Gusto Payroll is crucial for ensuring they are correctly reflected on your W-2 forms. The primary objective is to provide Gusto with the necessary information to report employee contributions, which are required to be included on the W-2.

Information that Needs to be Reported on the W-2:
- Not all contributions need to be reported via payroll. Only Pre-tax and Roth Employee Contributions Need to be reported on the W-2.
- Employer contributions and after-tax contributions do not need to be reported on the W-2 and, therefore, do not require notification to Gusto.
Flexible Contribution Payments:
- From a Solo 401k perspective, contributions do not need to be processed through payroll. It is acceptable from a solo 401k perspective to deposit all types of contributions, including employee, employer, and after-tax contributions, directly from either a personal account or a business account.
Payroll Tax Obligations:
- Making contributions to a Solo 401k does not reduce your obligation to pay payroll taxes, such as Social Security and Medicare.
- It’s important to ensure that these payroll taxes are calculated and paid separately, regardless of your Solo 401k contributions.

Understanding these distinctions will help you streamline the reporting process and focus on the contributions that need to be communicated through payroll. With this foundation, you can proceed confidently through the integration steps, ensuring compliance and efficiency in managing your retirement contributions.

Important Note for Fidelity Account Holders Using Gusto Payroll:

If you are a Fidelity account holder using Gusto (or other payroll providers) to make Solo 401k contributions, please note that there is an alternative automatic contribution option available through Fidelity’s platform. For those using Gusto Payroll who choose make automatic contributions to accounts at Fidelity for their self-directed solo 401k, the automatic contribution method is instead of the procedures described below. To set up automatic recurring contributions directly through Fidelity, please refer to No. 6 of How to Make Solo 401k Contributions Guide: 7 Ways to Fund Your Self-Directed Solo 401k Account at Fidelity – My Solo 401k Financial for detailed instructions on how to use Fidelity’s integration for payroll contributions.

Step-by-Step Guide to Gusto Payroll Integration with My Solo 401k Financial

Step 1: Sign In

Step 2: Navigate to Benefits

Go to the Benefits section.

Step 3: Access 401(k) Options

Under “Financial Health,” click on Traditional or Roth 401(k) (as applicable).
- As noted in the Key Concepts section above, only the Pre-tax and/or Roth Employee Solo 401k contributions need to be reported to Gusto so that they can be reported on the W-2.
- If both Pre-tax and Roth Employee Solo 401k contributions will be made, this process needs to be followed twice (i.e. once to report the Pre-tax Employee Solo 401k contributions and second time to report Roth Employee Solo 401k contributions to Gusto).

Step 4: Confirm Benefit Offering

Select “Yes — we currently offer this benefit.” Then, click “Next.”

Step 5: Manage 401(k) Independently

Click “Continue to manage your 401(k) manually instead”

Step 6: Name the Benefit

Add a name for the benefit (e.g. “Pre-tax Solo 401k” or “Roth Solo 401k” as applicable). This name will appear on the paystub.

Step 8: Select Benefit Type

Choose the benefit type. If employees participate in both a 401(k) and Roth 401(k), set up deductions for one benefit at a time. Repeat these steps for the second benefit after setting up the first.

Step 9: Define Employee Deductions

Under “Employee deduction per pay period,” specify whether employees contribute a fixed dollar amount or a percentage of their wages, and the amount to be deducted.

Step 11: Set Deduction Limits

Indicate whether your plan uses the standard deduction limit or the special catch-up limit.

Step 12: Select No Company Contributions

As noted in the Key Concepts section above, Employer Contributions don’t need to be reported on the W-2 and therefore don’t need to be reported to Gusto.
Therefore, simply select “Do not contribute.”

Step 13: Save Your Settings

Click “Save & continue.”

Next Steps: Transfer Contributions to Solo 401k Accounts

After setting up your Solo 401k contributions in Gusto, the next crucial step is to ensure that the designated funds are transferred to the appropriate Solo 401k account for each Solo 401k participant. It’s important to note that Gusto will not automatically withdraw these contribution amounts from your connected business bank account or deposit them into the employee’s direct deposit account.

Here’s how the process works:

Understand the Payroll Deduction: When an employee is paid, for example, $1,000 in W-2 wages and chooses to contribute $100 to their 401k, Gusto will only withdraw $900 from the business bank account. This $900 reflects the net pay after the 401k contribution deduction.
Transfer the Contribution: The remaining $100, which represents the employee’s 401k contribution, will need to be manually transferred from the business bank account to the applicable Solo 401k account. This transfer ensures that the contributions are appropriately allocated to either a pre-tax or Roth 401k account, depending on the Solo 401k owner’s election.

Learn More:

QUESTION: Make both Employee Pre-Tax Contributions and Employer Contributions

I want to ‘deduct’ $1000 from my salary monthly (pre-tax)

I also want my ’employer’ to make profit sharing employer contributions. How would this occur and be reported on the W-2?

ANSWER:

Let’s assume the following:

For each payroll period the individual receives $1000 of w-2 wages/compensation.
Of this amount the individual wishes to contribute $150 to their 401k each payroll period.
Separately, a $100 employer contribution will be made to the Solo 401k.

In this scenario and per the procedure referenced below:

$850 will be transferred to the individual’s personal account as their “direct deposit” wages
$150 will remain in the business account and will need to be transferred to the individual’s pre-tax or Roth Solo 401k sub-account as applicable as a Pre-tax or Roth employee contribution (elective deferral)
Separate from the Gusto process (since employer contributions are not reported on the w-2 and therefore Gusto doesn’t need to know), the $100 employer contribution will be transferred to the employee’s pre-tax 401k account as an employer contribution.

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