S-Corp: Profit Sharing vs. Employer Match, what's the difference if any

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Elysium
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Joined: Mon Apr 02, 2007 6:22 pm

S-Corp: Profit Sharing vs. Employer Match, what's the difference if any

Post by Elysium » Tue Sep 04, 2018 6:33 pm

I have not quite understood the treatment of profit sharing vs. employer match, or if it matters at all when it comes to single owner / employee S-Corp as in my case. Is there any, other than when do I contribute? I understand employer match goes along with paycheck, and profit sharing can be made any time before the company tax deadline, and if filing extention by that date. But all of that is still treated as a single pool for tax and reporting purposes as I understand.

For instance, if a single owner / employee S-Corp paid $100K in W2 wages, then he is allowed to contribute $25K (25%) annually as employer match / profit sharing, and it is reported under profit sharing when filing taxes. This is how my CPA has done it anyway for the last couple of years I have done this. In the first year, I used to contribute along with paycheck a percentage of salary, but last year and this year decided to just contribute on an unscheduled basis. Vanguard treats everything as employer matching, there is no separate entry for profit sharing under their plan. I don't know if this is how all Solo 401(k) setups are. So far this is all working out well for me. I am just trying to figure out if I am missing anything in this specific situation.

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