Schedule C 1099-MISC solo 401K query

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freedom66
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Joined: Thu Jan 22, 2015 2:51 pm

Schedule C 1099-MISC solo 401K query

Post by freedom66 » Fri Aug 31, 2018 8:02 am

Thank you in advance for your experience and expertise.

I am trying to determine how much I can contribute to an individual/solo 401K as a 1099 self-employed person over 50 (sole proprietor). This is my only earned income, with my other income sources being a pension and investment distributions. To determine the amount I can contribute, I need to fill out a Schedule C to determine my business profit.

One of the line items on Schedule C (line 19) is “Pension and profit-sharing plans” which is the employer portion of the solo 401K contribution. This is the cart before the horse because I have to know my net business profit to determine how much my employer contribution can be! An IRS publication even states “Note that your plan compensation and the amount of your own plan contribution/deduction depend on each other – to compute one, you need the other (this is a circular calculation)”. LOL

For those of you who are 1099-MISC self-employed sole proprietors or other members with this tax preparation experience, can you please explain to me how to go about this in the most simple and logical way? As far as I can tell I need Schedule C, Schedule SE, and Form 1040 (lines 27 and 28). My Gross income for 2018 will be about $60K, my deductions (except for the unknown line 19) will be about $10K and I want to contribute the maximum amounts as employer and employee and catch up.

livesoft
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Re: Schedule C 1099-MISC solo 401K query

Post by livesoft » Fri Aug 31, 2018 8:23 am

Make the employer contribution after the end of the tax year, say in January, February, or March after you have all the other numbers to fill out Schedule C. Your tax prep software will help you with the calculation, but there are calculators on the web and one at irs.gov.

I am pretty sure that you can also make the employee contribution after the end of the tax year, but before taxes are due in April.
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freedom66
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Re: Schedule C 1099-MISC solo 401K query

Post by freedom66 » Fri Aug 31, 2018 8:34 am

Rgr, I'll definitely wait until 2019 to make the contributions and I did verify I can set up the plan in 2018 and make both contributions in 2019. But I'm still fuzzy on the circular calculation on Schedule C even if I do it in 2019.

feehater
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Re: Schedule C 1099-MISC solo 401K query

Post by feehater » Fri Aug 31, 2018 8:38 am

As a sole proprietor, both your employer and employee contributions go on the 1040, on the line where you subtract contributions to qualified plans. The line on the schedule c you are referring to would be if you contributed to retirement plans for your employees.

freedom66
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Re: Schedule C 1099-MISC solo 401K query

Post by freedom66 » Fri Aug 31, 2018 8:45 am

Ah, I think I am seeing the light now. So on 1040 line 28 (Self-employed SEP, SIMPLE, and qualified plans) that is sum of both the employer and employee contributions for me? This is turning from incredibly complicated to very easy.

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Duckie
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Re: Schedule C 1099-MISC solo 401K query

Post by Duckie » Fri Aug 31, 2018 6:49 pm

freedom66 wrote:So on 1040 line 28 (Self-employed SEP, SIMPLE, and qualified plans) that is sum of both the employer and employee contributions for me?
What goes on Form 1040 line 28 depends on how you figure things on the worksheet in Chapter 5 of Publication 560.

freedom66
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Re: Schedule C 1099-MISC solo 401K query

Post by freedom66 » Sat Sep 01, 2018 4:39 am

Rgr, I did that worksheet and now everything makes sense. Thank you all.

:sharebeer

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