Can I make a retirement contribution for 2019 after filing my US taxes?

January 13, 2020 1:51 AM

I have a Solo 401K plan that I haven’t yet funded for 2019. My understanding is that ordinarily I’d have until my tax return deadline (April, or October if I filed an extension) to fund the plan for 2019. But for Reasons, I need to file my taxes sooner — and would still like to have the option of making a Solo 401K contribution later in the year. Is that possible?

I set up a Solo 401K plan before the end of 2019, with the intention of funding it in April once my cashflow stabilized a bit. Now, though, it looks like I’m going to need to file my tax return ASAP so that we can get an IRS transcript in time for a planned home purchase.

Ideally, I’d like to be able to file my taxes now, and still make a 2019 contribution to my 401K in April or October, and then file an amended tax return to reflect the contribution. Is that possible? Or do I need to make a final decision on my 2019 retirement contributions before filing an initial tax return? (I’m filing in Illinois, in case state tax rules make any difference here.)

I understand that I could simply apply the contribution to my 2020 return, of course. But there's a chance I'll be able to max out my contributions this year, in addition to this contribution, so I'd like to apply this contribution to my 2019 return if possible.

posted by anonymous to Work & Money (4 answers total)

Is there a reason you can’t just file an amended return after you make the contribution? I don’t know anything about solo 401k but you would certainly be able to do that with a regular IRA. Maybe the company that runs your 401k can give you some guidance here?
posted by mskyle at 5:16 AM on January 13, 2020 [2 favorites]

I have heard that you can call the IRS and talk to someone and that this can be actually helpful. But two thoughts are that you can file an extension-pay your taxes but file an extension even though you are paying them early. Or do an amended return. I would think regardless of what you do, your top up contribution would have to be before the tax deadline. Check with your 401(k) administrator.
posted by amanda at 5:39 AM on January 13, 2020

We do something like this almost every year with my wife's SEP IRA. I am by no means a financial expert, so I don't know if the rules of Solo 401K and SEP IRAs are the same, but our procedure is basically the first item amanda suggested above: an extension.

• Our tax preparer takes all of our financials as soon as we have them and does our return. Last year this was around Feb 1 since we had a deadline for our son's college financial aid.
• Before April 15 we pay our estimated state and federal taxes (with our expected SEP contribution accounted for- see below), however we also file an extension, which allows us to keep funding the SEP up through October 15 when the extension is due.

To my understanding there are two things using this method that are important to take into account.

1. When our tax preparer does the initial return in February, he asks for the *exact* amount we will be able to fund the SEP with. He typically throws out a suggested number based on the details of the return and we double-check that it's doable. He gets very cranky in October if the true number is different than what we originally stated, because that means he has to redo the return.
2. It's also very important as you make these additional payments throughout the year that they are being credited correctly (2019 in this case). This is something that needs to be done through your investment company and in my case was just a simple case of choosing a pulldown menu for the correct year when making the payments. One year I screwed this up and my investment company got cranky when I asked them to reassign the payments, they were able to do it, but it was such a hassle that I swore I would never make that mistake again (and I had to pay a small service fee for the privilege.)

Again, everything above applies to our SEP account, I have no idea if the rules are the same for Solo 401ks.
posted by jeremias at 8:39 AM on January 13, 2020

I'm not an expert on Solo 401(k)s but to throw an idea out there - if you have a Roth option for the 401(k) and it makes sense to use it, you would not have to refile taxes if it's similar to the way IRAs work.
posted by Candleman at 1:16 PM on January 14, 2020