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R. Klein, EA
R. Klein, EA, Accountant
Category: Financial Software
Satisfied Customers: 3375
Experience:  A member of the Intuit Ask a Tax Expert team and 10 years as QuickBooks Certified Pro Advisor.
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I set up a solo 401K in December of 2012. I rolled over an

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I set up a solo 401K in December of 2012. I rolled over an IRA of $12,475.43. I took a "personal loan" of $6000. I have a full time salaried job 40 hours a week and earned 98,373.85 in 2012 from that and I earned $3312.70 from my Network Marketing business that I run out of my home. I am using TurboTax and need to understand how to maximize on this solo 401K. Currently I owe $2500 and I'm hoping the Solo 401K will help me get this down but I don't know where or how to enter this information.

R. Klein, EA :

Hello and thanks for your tax question.

Customer:

Thank you as well

R. Klein, EA :

Your maximum contribution to a retirement account that has an SEP component is limited to 20% of the net income from the activity.

Customer:

English?

R. Klein, EA :

You will not be able to eliminate the entire 2500 balance due at this point

R. Klein, EA :

Your max contribtion is20% of 3313 if that is the NET profit

Customer:

I see, so I can only count the profit from my personal business, not that of my salaried job.

R. Klein, EA :

I'm assuming you are not self employed for that W-2 income

R. Klein, EA :

(i.e. you own your own S-Corp)

Customer:

Correct I have a day job

Customer:

I borrowed against this solo 401K as soon as I opened it. I'm assuming I need to report that as income?

R. Klein, EA :

You MIGHT be able to contribute up to the full 3313, but I would also need to know if you have a 401k at the wage job

R. Klein, EA :

Borrowed money is NOT taxable income

Customer:

I did not have a 401K at my wage job in 2012

R. Klein, EA :

Paying it back is NOT deductible

Customer:

This is very helpful. Wish I had found this website sooner. Ok, so what do I need to tell the IRS?

Customer:

Just making sure you got my last question

R. Klein, EA :

If you want to contribute to the SoloK, you must make your contribution within the next 10 minutes,

R. Klein, EA :

Otherwise it is too late for 2012

Customer:

I do not plan to contribute to the solok in the next 10 minutes. So at this point I just want to make sure I report what is necessary so that the IRS does not come knocking

R. Klein, EA :

so, realistically, it is too late.

R. Klein, EA :

If you did not get a 1099-R form, there is nothing to report

Customer:

I put 12K into it in Dec 2012

R. Klein, EA :

For 2012?

Customer:

To be honest, I don't recall if I did or did not get the form. I have looked in my papwork and don't see anything.

R. Klein, EA :

Houston, we have a problem.

Customer:

Yes in Dec 2012, I rolled over funds from an IRA into the Solo 401K - I created it in dec 2012

Customer:

humor - I need that :-)

R. Klein, EA :

If you rolled funds over, then it is NOT a new contribtion, then NO problem

Customer:

forgive my ignorance, but what do you mean by "contribution"

Customer:

(no laughing)

Customer:

Interesting update: I created this solo 401K in Dec but I show the deposit of the rollover funds from Key Bank to be 2/5/2013. Any advice on this?

Customer:

Are you still assisting me or did I lose you?

R. Klein, EA :

I am here

R. Klein, EA :

has no effect on anything

Customer:

Ok - happy to botXXXXX XXXXXne this. What do I need to reflect to ensure the IRS is happy. I'm sure they would want to know I rolled this over and created a solo 401K and pulled out 6K even if it's not income, correct? I'm using TurboTax and at a standstill.

R. Klein, EA :

Nothing..

R. Klein, EA :

The rollover occurred in 2013 so it is reported in 2013

R. Klein, EA :

no deduction allowed for 2012

R. Klein, EA :

no income either from IRA

Customer:

Ok. I guess that's that then. The person who talked me into the solo 401K eluded that I could write off all sorts of things as a result of doing this. I didn't realize he was referring only to the income earned in my network marketing business. He failed to add that point.

Customer:

Any other nuggets of advice before I rate you Excellent?

R. Klein, EA :

That's OK. ... Thank you!

R. Klein, EA :

You now know that the max contribution for new money is 20% of the net income

Customer:

From the personal business only, correct

R. Klein, EA :

But the 401k element allows dollar for dollar to 15.5K

Customer:

Note to self: next life - marry a CPA LOL

R. Klein, EA :

have a good evening!

R. Klein, EA :

I married a CPA - sheknows nothing about tax

Customer:

Thank you LOL have a great rest of the night. Love this site. Connect with me on LI www.linkedin.com/in/raeganhill

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