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Level 2

How to categorize solo 401k contributions as employee and employer

Hi all,

 

I have a new sole proprietorship and am using quickbooks online. I plan on starting a solo 401k which I understand has an employee and employer contribution.

 

Can i calculate out what the contributions should be and then just take one owners draw, or do i have to separate them for some reason. I am reasonably confident that the employee contribution is just a draw, but I can't seem to find if the employer side needs to be handled differently.

 

Thanks for the help!

 

Solved
Best answer 12-15-2018

Best Answers
Highlighted
Level 15

How to categorize solo 401k contributions as employee and employer

The Banking is one lump from Equity; you send the money to the investment broker holding your account. You don't have two parts; there is no Deduction from the employee's payroll, because you are not your own employee and you don't get paid gross wages from payroll and there cannot be a deduction from what does not exist. That part of the Computation doesn't apply to you. Your part is a different section of the provision.

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Highlighted
Level 15

How to categorize solo 401k contributions as employee and employer

You have a Different calculation for yourself.

 

Read this topic, skip the part that mentions W2 earnings, because you have none.

https://www.irs.gov/retirement-plans/one-participant-401k-plans

Highlighted
Level 2

How to categorize solo 401k contributions as employee and employer

I understand that there are two separate calculations. My question is, for the purposes of accounting, can i treat it as one lump draw or is there some GAAP that says they should be treated differently.

Highlighted
Level 2

How to categorize solo 401k contributions as employee and employer

As an example, say I am contributing 18,000 as employee and 20,000 as employer. Im quickbooks, is it just a 38,000 owner draw, or do i need to keep them separate for some reason. Or does the employer contribution need to be handled in an entirely different way?

Highlighted
Level 15

How to categorize solo 401k contributions as employee and employer

The Banking is one lump from Equity; you send the money to the investment broker holding your account. You don't have two parts; there is no Deduction from the employee's payroll, because you are not your own employee and you don't get paid gross wages from payroll and there cannot be a deduction from what does not exist. That part of the Computation doesn't apply to you. Your part is a different section of the provision.

View solution in original post

Highlighted
Level 2

How to categorize solo 401k contributions as employee and employer

I have the same issue.  I have a sole proprietorship LLC and have signed up for a sole / individual 401k.  I have made a contribution to it, and I realize that this will all be reported on my personal tax, but I wanted to figure out what accounts it was best to include it in on quickbooks online.  quickbooks online automatically categorizes it as "interest paid" which is clearly mistaken, but I wasn't sure if it was more appropriate to create a new Owners Equity type account (like a distribution) that i could call 401k contributions (so i can keep track of how much I've contributed to make sure I don't go over the limit) or make it an expense item?  I assume Owners Equity it more appropriate but I didn't see a final response on what to do in these strings.  I'd appreciate any help.  Thanks

 

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Level 1

How to categorize solo 401k contributions as employee and employer

I have a similar issue.   What is the proper way to set up a Solo 401K in QB for a Sole Proprietor, as I am not using payroll, just Owner's Pay?

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