by Clode Moradi, MSPFP, CFP®
There’s lots of confusions about this, so I’m going to give a basic explanation about account establishment, without getting into contribution calculations and how best to set them up. I like to cover that on a case by case basis, instead of putting out generic info.
Deadline for 2018 Tax Year
If you want to make contributions (employee deferral and Profit-Sharing contribution by employer), the Solo 401(k) HAS to be setup by December 31st of 2018. There’s a lot of confusion about this because this is not the case for a SEP Ira and most people think that a SEP and a Solo 401(k) have the same account establishment rules. They do not…
As long as the Solo 401(k) account is set up by December 31, 2018, you can contribute to it for tax year 2018. Your salary deferral contribution will be based on your W2 income (Corp) or profits (Sole Proprietor) from 2018 and the profit-sharing portion comes from the business. Keep in mind that the type of business entity you operate under makes a difference on your allowed profit-sharing contribution amount and needs to be calculated correctly. Also, max allowed contribution limit for both the salary deferral and profit sharing is $55,000 if you are under 50 years of age and $61,000 if you are over 50 years old.
Even though you can contribute your employee salary deferral amount later than December 31st (before tax return deadline), you need to file your W2 for 2018 in a timely manner and specify how much you plan to contribute. Max amount for 2018 tax filing is $18,500 ($24,500 if you are over 50 years old), calculated as a dollar for dollar contribution of W2. Make sure you let your account or payroll company know about this before you do anything else.
If you have any questions or would like to come in for a detailed consult on business tax planning, please call to make an appointment. We have already started planning for the 2019 tax year.
Clode Moradi, MSPFP, CFP®
Clode is an independent Certified Financial Planner™ and has a Post-CFP® Masters Degree in Advanced Personal Financial Planning, from Kansas State University, one of the most prominent financial planning universities in the nation. He graduated at the top of his class with a 4.0 GPA and was awarded a nomination and acceptance into the honorary society of Phi Kappa Phi to represent the importance of higher education in the Financial Planning industry.
Clode specializes in taxation, retirement, and investment planning as they relate to personal goals and quality of life. He also holds a Graduate Level Certification in Financial Therapy, and has written extensive research articles on financial topics such as goal based portfolio construction, how to define “financial success”, money psychology and its manifested human behaviors, and various other topics related to finance, taxation, and human behavior as they relate to one’s quality of life. Clode also has a Bachelor’s Degree in Personal Financial Planning, where he graduated Summa Cum Laude from Franklin University of Ohio. He is an active member of the Financial Planning Association and Financial Therapy Association.
Clode is the founder of Brilliant Financial Strategies, LLC. He started in the financial industry more than 20 years ago and created BFS as a platform to offer financial planning at a much deeper level. Clode feels that Financial Planning needs to break out and surpass the status quo. “Our job is to help clients make use of their financial potential to build a meaningful life”.
He enjoys spending quality time with his wonderful family. Clode’s hobbies include saltwater fishing and Brazilian Jiu-Jitsu. Clode is the creator of a group called Kool Kids Fish that introduces kids and their parents to the hobby of fishing, as a means of spending quality time together. Clode also coaches a kids Jiu-Jitsu Competition class at Gracie Barra La Canada-Flintridge, where he works with kids and teens that compete in Jiu-Jitsu tournaments nationally. One of his most valued personal accomplishments is receiving his brown belt in Brazilian Jiu-Jitsu from ADCC world champion Orlando Sanchez of Gracie Barra.
Clode’s approach to life, money, and financial planning is to create quality of life through balance and honest self-reflection. He believes that abundance can only have value when there is balance in one’s household, family, and internal being. He brings this approach to all aspects of life.
This article is for reference and informational purposes only and does not provide tax, legal, or accounting advice. It is for guidance only and not a substitute for the user seeking personalized financial planning and professional advice. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own financial, tax, legal, and accounting advisors before engaging in any transaction.
These benefits are complicated, and this article is not intended to be tax advice. The IRS has exclusions and restrictions and qualifications. If you are considering offering these benefits to employees, be sure you check with a tax professional or your benefits advisor first.
*This is not an official list, but a possible list of certain services we have done research on. Please check with your HSA provider and accountant, to see if certain services qualify before assuming that they will qualify to be paid for through your HSA account. Also, see IRS Publication 502 for more details.
This website and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, or legal advice.