Need help woth Solo 401k contribution - tax year coding

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saagar_is_cool
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Joined: Thu Jan 30, 2014 2:21 pm

Need help woth Solo 401k contribution - tax year coding

Post by saagar_is_cool »

My spouse has a Solo 401k with Fidelity for her business. In 2020, we filed the taxes for 2019 by April 30 2020. At that time, the Fidelity rep, correctly deposited 18.5k as Employee contribution for prior year contribution and remaining as Employer Contribution.

In 2021, we took an extension for filing, and we deposited in August 2021 for Tax year 2020. When the rep deposited, he deposited the Employee Contribution as Current Year contribution. I did not know about this. this year again, we took an extension for filing 2021 taxes and I went last week to deposit the Employee and Employer contributions. While the employer contribution was deposited, the Agent had an issue depositing the Employee contribution of 19.5k as the system said the contribution for tax year 2021 was already made. She called Fidelity backoffice and told me that she will have to deposit as Current year again and it does not matter, as Fidelity does not report it and I just need to keep my tax returns and details for IRS purposes.

I am a little concerned now as it will have a cascading effect every year. Will there be an issue with this in the future. How do you approach this. Any guidance or suggestions are appreciated.
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FiveK
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Re: Need help woth Solo 401k contribution - tax year coding

Post by FiveK »

saagar_is_cool wrote: Thu Aug 04, 2022 6:39 pm In 2021, we took an extension for filing, and we deposited in August 2021 for Tax year 2020. When the rep deposited, he deposited the Employee Contribution as Current Year contribution.
What (if anything) is on line 15 of your 2020 Form 1040 Schedule 1?
Topic Author
saagar_is_cool
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Re: Need help woth Solo 401k contribution - tax year coding

Post by saagar_is_cool »

FiveK wrote: Thu Aug 04, 2022 7:10 pm
saagar_is_cool wrote: Thu Aug 04, 2022 6:39 pm In 2021, we took an extension for filing, and we deposited in August 2021 for Tax year 2020. When the rep deposited, he deposited the Employee Contribution as Current Year contribution.
What (if anything) is on line 15 of your 2020 Form 1040 Schedule 1?
It has the total amount claimed 19,500 + Employer Contribution amount. Why do you ask.
HomeStretch
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Re: Need help woth Solo 401k contribution - tax year coding

Post by HomeStretch »

It doesn’t matter whether Fidelity assigns the Solo 401k contribution to the correct plan/tax year or whether Fidelity correctly breaks out employEE v. employER contributions. Fidelity is not the plan administrator (you are) and doesn’t report this information to the IRS. The important thing is that you, as plan administrator, correctly track the information in case of IRS inquiry and to properly complete Form 5500-EZ, if required.

Edit - the only plan level reporting by the provider to the IRS that I have experienced is for 1099-R reporting situations such as distributions related to roth conversions.
Last edited by HomeStretch on Sat Aug 06, 2022 8:31 am, edited 1 time in total.
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FiveK
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Re: Need help woth Solo 401k contribution - tax year coding

Post by FiveK »

saagar_is_cool wrote: Fri Aug 05, 2022 7:48 pm It has the total amount claimed 19,500 + Employer Contribution amount. Why do you ask.
Because if Fidelity sent something to the IRS with different information, getting things fixed with Fidelity would get a higher priority.

If, as HomeStretch noted, Fidelity doesn't communicate with the IRS about this account, then it seems "nice to do but not required" to get things fixed with Fidelity.
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MP123
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Re: Need help woth Solo 401k contribution - tax year coding

Post by MP123 »

saagar_is_cool wrote: Thu Aug 04, 2022 6:39 pm I am a little concerned now as it will have a cascading effect every year. Will there be an issue with this in the future. How do you approach this. Any guidance or suggestions are appreciated.
At some point you will need to file 5500-EZ, that can be done on either a cash or accrual basis (as long as you're consistent) and it doesn't need to match the method you use for your business accounting. The plan is a separate entity.

So, you could report the contributions made during the year for the year rather than the total which includes the prior year contribution made during the year if you prefer.

Other than 5500 forms I don't think there is any plan level reporting by either you or the custodian.
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