401K contributions sans job
September 8, 2008 2:55 PM Subscribe
Tax mavens: Is there a way I can contribute to a 401K this year w/o a job?
I've been self-employed since April and do not expect (or particularly want) to have income until November/December. I rolled over the company 401K into a IRA in May.
I made over $15,500K -- enough to put me in the 34.3% marginal Fed+CA brackets -- in my former employment this tax year but neglected to start the 401K contributions.
Is there a way I can redirect my $15,500 of my savings into a 401k-like deductible account so I can get that $5300+ tax savings?
I also have started a C-Corp this year; while I have not put any capital into it nor paid myself out of it yet I plan on firing it up later this year.
I've been self-employed since April and do not expect (or particularly want) to have income until November/December. I rolled over the company 401K into a IRA in May.
I made over $15,500K -- enough to put me in the 34.3% marginal Fed+CA brackets -- in my former employment this tax year but neglected to start the 401K contributions.
Is there a way I can redirect my $15,500 of my savings into a 401k-like deductible account so I can get that $5300+ tax savings?
I also have started a C-Corp this year; while I have not put any capital into it nor paid myself out of it yet I plan on firing it up later this year.
My understanding is that you can do a SEP IRA which has much higher limits than a 401(k).
posted by charlesv at 3:40 PM on September 8, 2008
posted by charlesv at 3:40 PM on September 8, 2008
You made over $15,500,000 this year? And you're asking random websites for tax advice!? Get thee to a tax attorney! You can damn well afford it.
posted by valkyryn at 3:47 PM on September 8, 2008
posted by valkyryn at 3:47 PM on September 8, 2008
Also look at a defined benefit plan for your c corp. If you are over 45ish it may be a big help.
posted by JohnnyGunn at 3:59 PM on September 8, 2008
posted by JohnnyGunn at 3:59 PM on September 8, 2008
You made over $15,500,000 this year? And you're asking random websites for tax advice!? Get thee to a tax attorney! You can damn well afford it.
For serious! I mean, you shouldn't be taking tax advice from people who don't wholly know your tax situation anyway, but when we're talking millions of dollars? Good lord, go to your accountant!
posted by dirtynumbangelboy at 4:08 PM on September 8, 2008
For serious! I mean, you shouldn't be taking tax advice from people who don't wholly know your tax situation anyway, but when we're talking millions of dollars? Good lord, go to your accountant!
posted by dirtynumbangelboy at 4:08 PM on September 8, 2008
It seems pretty clear that OP means he made 15.5K, or $15,500. Not 15 million dollars.
posted by RustyBrooks at 4:20 PM on September 8, 2008
posted by RustyBrooks at 4:20 PM on September 8, 2008
Response by poster: :)
The problem with the SEP IRA is that it requires self-employment income, which means the working-for-the-man income I have from earlier this year is still going to be taxed at the 34% marginal rate.
posted by troy at 4:27 PM on September 8, 2008
The problem with the SEP IRA is that it requires self-employment income, which means the working-for-the-man income I have from earlier this year is still going to be taxed at the 34% marginal rate.
posted by troy at 4:27 PM on September 8, 2008
You're taxed on your total income, not on individual chunks. So reducing your self-employment income is as good as reducing your working-for-the-man income from a tax standpoint.
posted by kindall at 4:43 PM on September 8, 2008
posted by kindall at 4:43 PM on September 8, 2008
Response by poster: yes, but I basically have the option (and desire) of deferring the SE income to 2008, plus it's unclear to me that I will even receive $15500 in SE income (ie bona fide sales) this year.
I guess I could run ~$16000 of savings through the C corp as capitalization and have it pay a salary to me to get the SE income to push into a solo 401K . . . that might work, but I was hoping there was a way to back up the tape to April and re-do the W-2 401K stuff.
grr, I should probably pay my first visit to a tax attorney
posted by troy at 5:01 PM on September 8, 2008
I guess I could run ~$16000 of savings through the C corp as capitalization and have it pay a salary to me to get the SE income to push into a solo 401K . . . that might work, but I was hoping there was a way to back up the tape to April and re-do the W-2 401K stuff.
grr, I should probably pay my first visit to a tax attorney
posted by troy at 5:01 PM on September 8, 2008
I made over $15,500K -- enough to put me in the 34.3% marginal Fed+CA brackets.
You would have to make a lot more than $15,500 to be in the 34.3% marginal rate.
Since you were eligible for an employer sponsored plan for part of the year, even though you didn't contribute, you are considered by the IRS to be an "active participant.'' This affects your eligibility for a deductible IRA.
If your modified adjusted gross income (MAGI) for the year is less than $53,000 (single) or $85,000 (married) then you can contribute $5000 to a deductible IRA. If greater, then there is a phase out and only part of your contribution is deductible.
If you have self-employment income, then you can also contribute up to 25% of your self-employment income to a SEP IRA in addition to your traditional IRA.
posted by JackFlash at 5:10 PM on September 8, 2008
You would have to make a lot more than $15,500 to be in the 34.3% marginal rate.
Since you were eligible for an employer sponsored plan for part of the year, even though you didn't contribute, you are considered by the IRS to be an "active participant.'' This affects your eligibility for a deductible IRA.
If your modified adjusted gross income (MAGI) for the year is less than $53,000 (single) or $85,000 (married) then you can contribute $5000 to a deductible IRA. If greater, then there is a phase out and only part of your contribution is deductible.
If you have self-employment income, then you can also contribute up to 25% of your self-employment income to a SEP IRA in addition to your traditional IRA.
posted by JackFlash at 5:10 PM on September 8, 2008
Response by poster: btw, I figured out the savings -> income idea was real stupid on my own, eventually.
posted by troy at 7:21 PM on September 8, 2008
posted by troy at 7:21 PM on September 8, 2008
This thread is closed to new comments.
posted by Nelson at 3:39 PM on September 8, 2008