Solo 401k or SEP IRA in Same Year as Temporary Employer-provided 401k?

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Independent2
Posts: 4
Joined: Sun Apr 08, 2018 9:58 am

Solo 401k or SEP IRA in Same Year as Temporary Employer-provided 401k?

Post by Independent2 » Mon Apr 16, 2018 10:17 am

Hi all- I'm a freelancer, however sometimes the clients I work with bring me on as 1099 and sometimes W2 (usually they dictate based on ease of getting me in).

In 2017, I had 1099 income between January and March, W2 income between March and September (where I participated in a 401k offered by the company, but did not hit contribution limits), and W2 income from September through December where participating in the company's 401k was not offered as an option.

I'd like to setup either a Solo 401k or SEP IRA today, to help shield some of my 1099 income in 2017. The question is, am I allowed to do that in the same year that I participated in an employer 401k (which was only between March and Sept)? I'm guessing yes since the timeframe when I earned the 1099 income was not the same timeframe I participated in the employer-provided 401k. Also, would the contribution limits be combined with the employer-provided 401k, or is that considered separate? Lastly, seems like the Solo 401k is better for me than an SEP IRA based on the info here, would you agree:
https://en.wikipedia.org/wiki/Solo_401( ... _a_SEP_IRA

Thanks for all the help!

pshonore
Posts: 6429
Joined: Sun Jun 28, 2009 2:21 pm

Re: Solo 401k or SEP IRA in Same Year as Temporary Employer-provided 401k?

Post by pshonore » Mon Apr 16, 2018 11:18 am

Too late for a Solo 401K which needs to be setup by 12/31 of the tax year. SEP should be fine. Limit would 20% of net SE income (1099 income minus expenses) after adjustment for 1/2 of SE tax paid. If you max out your employer 401K, there's not much difference with the SEP since that would reduce your "employee contribution" for an Solo 401K dollar for dollar.

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