SE Retirement contributions

[pamnicholea]

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.

[ljr]

google says yes a solo 401K and a SEP

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

[TaxGuyBill]

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

[qbteachmt]

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?

[pamnicholea]

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.

[pamnicholea]

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

[TaxGuyBill]

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@pamnicholea wrote:

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

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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]

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.

[qbteachmt]

"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.