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People are scrambling to complete their 2013 tax year return and also asking yourself exactly how they can save tax obligation for the 2014 tax year. The Solo 401( k) is a technique that couple of make use of. It is made for local business owners who have just family staff members. The limit is 2 participants, which generally is the business owner and also the partner. The Solo 401( k) is not a brand-new kind of 401( k) plan and also has the exact same guidelines and needs as any other 401( k) strategy. More details can be located on the Internal Revenue Service web site (1) and search for "Retirement-Plans-One_Participant-401k-Plans".

The company owner wears 2 hats in a 401( k) strategy: worker and also company. Payments can be made to the plan in both abilities.

The 2nd component is the company payment of up to either 25 percent of the compensation defined by the plan, usually wages, or a different computation for the independent person. If the person is age 50 or over, there can be an additional $5,500 "catch-up" payment, making the total maximum payment to the Solo 401( k) plan $56,500 for 2013 as well as $57,500 for 2014.

Instance of a Set up C, unincorporated local business, where the proprietor goes to the very least age 50 and also the web revenue in 2014 is $200,000:

One computes the Area 1402(a)( 12) Deduction, which lowers the number to $184,700. Following one makes use of Schedule SE to determine FICA as well as Medicare Tax, which completes $19,864.30. Fifty percent of this is $9,932,15, as well as is subtracted from $200,000. The outcome is $190,067.85 of Self-Employment Revenue. The optimum Worker Income Deferment payment is $17,500 plus $5,500 or $23,000. The maximum company earnings sharing contribution is $38,013.57 if one takes 20 percent of $190,067.85. The overall of the two contributions is $61,013.57. Nevertheless, one can not go beyond the complete limit of $57,500. Keep in mind: a detailed worksheet for this estimation can be found in IRS Publication 560. In contrast, the payment restriction for a SIMPLE IRA plan would be $20,035.96 or $38,013.57 for a SEP IRA strategy. One can add considerably even more to a Solo 401(k) as opposed to these various other 2 company Individual Retirement Account plans, and absolutely much more than the $6,500 limit for a conventional individual IRA strategy.

Target dates: One should develop your Solo 401(k) plan by December 31, 2014, if you intend to make a contribution for tax obligation year 2014 and also decrease taxable income. The contributions have to be funded by your tax-filing due date. If one apply for the 6-month extension prior to the April 15, 2015 target date to file one's 2014 income tax return, one would certainly have until October, 15, 2015, to make the cash money website contribution.


The Solo 401( k) is not a brand-new type of 401( k) strategy and has the exact same guidelines and also requirements as any kind of other 401( k) strategy. The company proprietor puts on 2 hats in a 401( k) strategy: employee and also employer. If the person is age 50 or over, there can be an added $5,500 "catch-up" payment, making the complete maximum payment to the Solo 401( k) plan $56,500 for 2013 as well as $57,500 for 2014.

One can add significantly even more to a Solo 401(k) rather of these other 2 employer Individual Retirement Account plans, and also certainly a lot even more than the $6,500 restriction for a traditional private IRA strategy.

Due dates: One must develop your Solo 401(k) strategy by December 31, 2014, if you want to make a payment for tax obligation year 2014 and also lower taxable income.