There are two types of contributions you can make to your solo or individual 401k: employee and employer. Employer contributions are also sometimes referred to as profit sharing.
Employee contribution: this amount is deducted from your wages. For 2024, the max amount is $23,000 per employee. If you are over 50, you can contribute an additional $7,500, for a total of $30,500.
Employee contributions must be made before the end of the calendar year. Your contribution will be reported on your paystub and W-2.
Employer contribution: this is the amount your business contributes to your 401k. As an s-corp, the amount equals 25% of your gross wages (before deductions like your employee contribution).
This contribution can be made any time before your business tax return is filed. Your contribution is recorded as a business expense and will be shown on your 1120S business tax return.
Additional information to keep in mind:
- The total contribute limit for 2024 (employee and employer amounts combined) is $69,000.
- Both types of contributions should come from your business bank account.
- If you are making regular employee contributions to your 401(k), but don't see it reported on your paystubs, submit a payroll ticket and your team will make sure it is recorded properly! For more info on how to request changes to payroll, click here.