Contribution to business 401k Question

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Williard
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Joined: Sat Dec 27, 2014 8:36 pm

Contribution to business 401k Question

Post by Williard » Sun Jul 29, 2018 7:20 pm

Hello,

I own a one-person LLC company. I set up a 401k and have been contributing to it for years. Recently, a new client paid me $18,000, but he wrote the check out to me personally instead of my company and I put the money in my personal account instead of my business account.

I don’t know if he plans on sending me a 1099 but I plan on declaring the income and paying taxes on it. My question: Can I also contribute this money from that client to my business 401k?

Thanks in advance!

Codyo32
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Joined: Sat Aug 11, 2018 8:46 pm

Re: Contribution to business 401k Question

Post by Codyo32 » Mon Aug 13, 2018 7:57 pm

Hello,

As long as you are reporting your business income on your taxes including this check then you will be fine contributing to your Solo 401k. I operate as a sole prop but I believe it is the same in the sense that it doesn’t really matter which account the $ is deposited into as long as your bookkeeping is squared away in reporting each check as income for your business.

The ‘business’ account v ‘personal’ account here is for ease of bookkeeping and keeping finances separate.

If you sent him a W9 form then you should expect a 1099. He’d be crazy not to if he is also a business owner because then he wouldn’t be able to deduct your services!

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LadyGeek
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Re: Contribution to business 401k Question

Post by LadyGeek » Mon Aug 13, 2018 8:07 pm

This thread is now in the Personal Finance (Not Investing) forum (retirement plan).

Codyo32, Welcome!
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JBTX
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Re: Contribution to business 401k Question

Post by JBTX » Mon Aug 13, 2018 8:26 pm

Williard wrote:
Sun Jul 29, 2018 7:20 pm
Hello,

I own a one-person LLC company. I set up a 401k and have been contributing to it for years. Recently, a new client paid me $18,000, but he wrote the check out to me personally instead of my company and I put the money in my personal account instead of my business account.

I don’t know if he plans on sending me a 1099 but I plan on declaring the income and paying taxes on it. My question: Can I also contribute this money from that client to my business 401k?

Thanks in advance!
If the $18k was payment for business services then yes it is business revenue and can be saved in your business 401k. To go further, if you chose not to declare it as business revenue, and instead treated it as a personal cash gift, that would likely be tax fraud.

As far as I know, you are not required to deposit business receipts in a business bank account. As a general rule you should, and it leaves a much cleaner audit trail, but not explicitly required

Spirit Rider
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Re: Contribution to business 401k Question

Post by Spirit Rider » Mon Aug 13, 2018 9:39 pm

From the IRS' point of view there is no difference between the a default single member LLC and the owner. There is no IRS problem with contributing this money from your personal checking account to your business 401k.

Could this be used to pierce the LLC's liability shield? Possibly, but it was probably a placebo for a single member LLC anyway. You have effectively co-mingled funds.

Williard
Posts: 14
Joined: Sat Dec 27, 2014 8:36 pm

Re: Contribution to business 401k Question

Post by Williard » Sun Aug 19, 2018 7:35 pm

Thanks to Spirit Rider, JBTX, and Codyo32 for taking the time to respond. Good to know I can add more money to my 401k. This Boggleheads forum is awesome!

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