pamnicholea
Level 1

Can a self-employed Schedule C business contribute to both a SEP and a 401K for the same year? This is his only business, has no employees.  She wants to make a contribution to both.  Proseries does not give an error on the Keogh/SEP/Simple Contribution Worksheet on the 1040 when I post amounts to both.

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ljr
Level 9

google says yes a solo 401K and a SEP

I didn't go down that rabbit hole to get you limits 

 

TaxGuyBill
Level 15

Yes, but why?  The employer contribution limits don't increase by spreading it out between two plans.

qbteachmt
Level 15

Are these plans both established by the same business, this person's SE operation? Is that a solo 401(k) or regular (with employees)? Are there employees?

How old is your taxpayer? What does the software give for the amount they can contribute to each plan?

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pamnicholea
Level 1

Yes, both plans are linked to her sole-proprietorship.  In 2023, she contributed $30,000 to her solo 401k and maxed out her SEP for $13,632. These are the max amounts calculated in Proseries on her $73,340 schedule C income.  She is 62 years old and had no employees.  Thank you.

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pamnicholea
Level 1

Also, is there a cap on the total contributions or do I use the contribution limits for each plan?

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TaxGuyBill
Level 15

@pamnicholea wrote:

In 2023, she contributed $30,000 to her solo 401k and maxed out her SEP for $13,632. 


 

Assuming she is age 50 or older, $30,000 was the maximum employee deferral amount.  

The $13,632 is the employer contribution.  A SEP was fine, but she could have also put it into the 401k instead.  There was no need for a separate retirement account for that.

qbteachmt
Level 15

401(k): $23,500 employee contribution max + $7,500 catch up amount for being 50-59 (which is why I asked her age) = $31,000

The self-employed "employer" share always is a bit recursive. It's around 20-25% of the gross.

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qbteachmt
Level 15

"is there a cap on the total contributions or do I use the contribution limits for each plan"

Same employee, no matter how many employers = one annual limit.

Same employer, no matter how many plans = one annual limit.

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