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Hi everyone,

I just wanted to confirm that we are allowed to in the same tax year contribute to both an IRA plus a solo401k. In the past I was able to do both when I had an employer sponsored regular 401k but this year I am on my own and wanted to know if I could make that employee contribution to the 401k if there is a net profit end of year.

Probably won't be able to also make an employer contribution as doesn't look like there is going to be that much profit.

Thanks.
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I just wanted to confirm that we are allowed to in the same tax year contribute to both an IRA plus a solo401k. In the past I was able to do both when I had an employer sponsored regular 401k but this year I am on my own and wanted to know if I could make that employee contribution to the 401k if there is a net profit end of year.
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Yes, but keep in mind that a solo 401(k)plan is an employer plan that covers you, so your AGI has to be low enough to qualify for a deductible IRA contribution.

Probably won't be able to also make an employer contribution as doesn't look like there is going to be that much profit.
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In that case, hold off on doing contributions until you know what the profit looks like - and you have up until the extended due date of your tax return to make that contribution.

In the meantime, you should be working with a professional accountant to do some planning with this kind of a business retirement plan. There's enough twists to a solo 401(k) plan that it shouldn't be a do-it-yourself project.

Bill
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Thanks Bill. And to clarify :

"so your AGI has to be low enough to qualify for a deductible IRA contribution", what about if it is low enough to qualify for a ROTH IRA?

The net profit is unlikely going to be anything over the maximum employee contribution allowed for 2019.

Thanks.
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In other words, does the ability to contribute to both an IRA and a solo401k have less issues if the IRA is a ROTH IRA and the roth meets the income limitations, even with a MFJ tax filing (and spouse covered by employer retirement plan)?
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mjpersely,

You wrote, "so your AGI has to be low enough to qualify for a deductible IRA contribution", what about if it is low enough to qualify for a ROTH IRA?

The net profit is unlikely going to be anything over the maximum employee contribution allowed for 2019.


Then do that instead. You just need to make sure you have enough in AGI to cover the Roth IRA contribution.

If you have very little income and then you contribute it all pre-tax to a solo-401(k), you wouldn't be able to make a Roth IRA contribution. But if you contribute to a Roth solo-401(k) I believe you can effectively double-dip because the Roth solo-401(k) contribution doesn't reduce your AGI ... which should let you still make a Roth IRA contribution.

- Joel
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Thank you!
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