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Accounting 401k question
Posted on 11/16/22 at 6:13 am
Posted on 11/16/22 at 6:13 am
The max amount to contribute to a 401k if you are self employed is $61,000 this year.
If the owner has a W2 salary of $100,000 per year and also has $50,000 of distribution income, how do the deductions work?
Is it $100,000 - $61,000 = $39,000 is the taxable income.
How are the deductions taxed differently?
Along this same note, any books you guys recommend to get a solid base on taxes, tax write offs, etc?
If there is one monster weakness in my financial knowledge it is understanding taxes.
If the owner has a W2 salary of $100,000 per year and also has $50,000 of distribution income, how do the deductions work?
Is it $100,000 - $61,000 = $39,000 is the taxable income.
How are the deductions taxed differently?
Along this same note, any books you guys recommend to get a solid base on taxes, tax write offs, etc?
If there is one monster weakness in my financial knowledge it is understanding taxes.
4
Posted on 11/16/22 at 7:28 am to I Love Bama
Does this help?
LINK
LINK
quote:
Self-employed 401(k) contributions may also make you eligible for added tax breaks. If your business is not incorporated, you can generally deduct contributions for yourself from your personal income. If your business is incorporated, you can count the contributions as a business expense.
Posted on 11/16/22 at 8:27 am to I Love Bama
I don't do taxes, but these assumptions are incorrect.
If your salary is $100k, you can defer $20,500 + $6,500 if you're over 50. Then your company can match 25% or $25,000. You will not be able to achieve the 61k in this scenario. Distributions don't count in the equation.
Good luck!
If your salary is $100k, you can defer $20,500 + $6,500 if you're over 50. Then your company can match 25% or $25,000. You will not be able to achieve the 61k in this scenario. Distributions don't count in the equation.
Good luck!
This post was edited on 11/16/22 at 8:52 am
Posted on 11/16/22 at 9:16 am to UpstairsComputer
Good information. Thank you.
Posted on 11/16/22 at 9:42 am to I Love Bama
Assuming you are talking about a solo 401K?
You can contribute $20,500 as an individual (based off your W2)
Profit sharing of 25% of net self employment income is allowed up to an additional $40,500
You can contribute $20,500 as an individual (based off your W2)
Profit sharing of 25% of net self employment income is allowed up to an additional $40,500
Posted on 11/16/22 at 10:21 am to I Love Bama
Are you an S Corp? If so... you can defer up to $20,500 of your salary ($27,000 if you are 50 or older). Your S Corp can then contribute up to a total "additions" limit which includes your deferral and the company contribution. For 2022, this amount is $61,000.
If you are self-employed on Schedule C, you can put in $20,500 (or the over 50 amount) of your self-employment income, plus you can put in 20% of yout self-employment income.
"Distribution income" is not a thing under tax law. Distributions are a cash out of already-taxed profits.
If you are self-employed on Schedule C, you can put in $20,500 (or the over 50 amount) of your self-employment income, plus you can put in 20% of yout self-employment income.
"Distribution income" is not a thing under tax law. Distributions are a cash out of already-taxed profits.
Posted on 11/16/22 at 10:23 am to I Love Bama
quote:
Along this same note, any books you guys recommend to get a solid base on taxes, tax write offs, etc?
Hire a local CPA for a few years. If your busienss stays stable you may be able to just copy and paste after a while... but they are very beneficial when you are starting out.
Not H&R Block, not a Big Four firm. Just a local guy who is a CPA and works with local busineses, who can appreciate you and give you the time you need while not charging $1,000 an hour.
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