Tax Planning/Solo 401K

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Question
Hi,

I am a sole proprietor and only employee of my business.  I am interested in setting up a Solo 401K since all the information I have found on the web seems to indicate this is the best vehicle for me.  I understand that it must be set up by Dec 31 of the year you wish to take deductions.  As far a funding it do I have to do it by Dec 31 also or do I have until April 15 the following year when I file my taxes.  Any information would be greatly apprciated, thank you.

John

Answer
Hi John,

There are two parts to a solo 401k.  First is the salary deferral and second is the company profit sharing contribution.

For the salary deferral part -
For unincorporated businesses the deadline is the tax filing date of April 15 of the next year plus extensions. For incorporated businesses the deadline is 15 days after the close of the fiscal year. For instance if December 31 ends the fiscal year, make contributions by January 15 of the next year.

For the profit sharing piece -
For unincorporated businesses the deadline is the tax filing date of April 15 (or October 15 if an extension was filed). For incorporated businesses the deadline is corporate tax filing deadline March 15, plus extensions.

So the short answer is you have until you file your return including extension time.

Hope that helps.

Tax Planning

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Chea Romine, CPA

Expertise

I am a CPA and Managing Partner of a medium sized CPA firm. I specialize in all areas of tax including personal, partnership, corporate, trust, estate and non-profit. We have multiple CPA's in the office that also bring insight or expertise into the questions. I also manage our accounting division and our business consultation division.

Experience

Managing Partner of a medium sized CPA firm with 6 CPA's and other support staff. Tax planning is our second largest divison in our firm.

Organizations
AICPA, Ohio Society of CPAs, National Society of Tax Professionals

Education/Credentials
Certified Public Accountant

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