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GF has a Solo 401k converted from an IRA. With her old SEP IRA, she would wait until she had done her taxes and then make a one time contribution for the previous year based on the allowed amount. She has done the same this year, not considering whether or not the rules were the same. I thought it might be that Solo 401k's follow similar rules to traditional 401k's which require contributions to be made during the calendar year in which they are deducted.

Can anyone give me a short primer in how Solo 401k's work so I can let her know what she has to do now as she finalizes her 2011 taxes?

Fuskie
Who notes she now realizes it may be too late to make a 401k contribution, but if so she could still open up a new SEP IRA, make a smaller contribution there and roll it over to a Solo 401k IRA like she did with her previous SEP IRA last December...
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Fuskie,

This may be a moot point based on how much your GF earned, and how much they are looking to contribute. If they made $100k, and wanted to put away $20k, that could be done by coding all the contributions as employer dollars. For an unincorporated business, its 20% of pay up to $49k for 2011, whichever is less. Anything more than 20% of pay will require the use of employee dollars.
Technically, salary deferral contributions must be remitted as soon as administratively feasible into a 401k Plan. So, that would mean, if a payroll occurred at year end, it would need to go in some time in early January.

However, since you are dealing with a Solo-k, there is some room to maneuver. If your GF is an unincorporated business, they are technically not drawing a salary in the traditional sense. Most likely a Schedule C filer or a 1099 worker. In that case, employee and employer money is able to be contributed up until the tax filing deadline plus extension.
However, the Plan needs to have been in place prior to the end of the calendar year. Funding is not required until tax filing deadline. If the business is an incorporated business, then the salary deferral portion must be made as soon as administratively feasible.

Bill
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