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RD
RD, Certified Public Accountant (CPA)
Category: Tax
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Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I have an S corp, single individually owned. I also have an

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I have an S corp, single individually owned. I also have an I-401K. My S Corp is giving me an individual paycheck (it only has consulting income), which is less than the total consulting fee received by my S Corp. How do I figure my contribution to the I-401K? Do I just use the gross income of my S corp., or do I use my paychecks from the S corp.? If I use the gross income to S corp., do I just make the contribution to I-401K from the S corp. bank account, and not my personal account?
Submitted: 4 years ago.
Category: Tax
Expert:  RD replied 4 years ago.

You can defer upto $16,500(if under age 50) from your payroll. In addition the S Corp can contribute upto 25% of the payroll as company match to your 401K.

 

The deferral from paycheck will reduce your net paycheck and the S Corp will write check to your 401K account for that amount. Company match will also be contributed by the S Corp to your 401K account.

 

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

Customer: replied 4 years ago.
Not sure what all of this means. This was for 2009, so I can't with-hold any dollars from my paycheck anymore. Say the S corp. got $100,000, and my pay was $60,000 (not to worry about SE Tax or WH for now). I take 16,500 from my pay (personal account) and put in the I-401K, and then I take 25% of 100,000 and have the S corp write a check for 25,000 to the I-401K? I don't think so, so is it 25% of the $60,000? or, rather, a check for $15,000 to I-401K from S corp.?
Expert:  RD replied 4 years ago.

Since you have taken a payroll of $60,000 - the deferral of $16500 should come out of this $60000. Hence, you net paycheck should have been reduced by this amount. Since the 401K deferral reduces your wages reported on Line 1 of Form 941 - this has to come out from wages and paid by the S Corp to the 401K account.

 

Regarding company match- it would be $ 60000 *.25 = $15,000. 25% in on the payroll you take and not on the total S Corp revenue.

This check is from the S Corp to the 401K account.

 

 

 

RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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