Self-Employed 401(k) Deadlines
Self-employed or owner-only businesses with no full-time employees can start a special kind of retirement plan called a Solo 401(k) or Individual 401(k) plan. Even spouses can potentially use it too! Solo 401(k)s are great in that you are both the employer and employee, so you can contribute up to $22,500 in 2023 as an employee and up to $66,000 in total by making employer contributions too. That’s a lot to put away to build for a comfortable retirement and might just drop you a tax bracket.
There are important government deadlines to know for Solo 401(k) adopters. 401(k) contribution and plan establishment deadlines vary based on if you are contributing as employer, an employee, and/or are setting up your first 401(k) plan. Plus, both contribution and plan setup deadlines vary by the business structure of your company (e.g., Sole Proprietor, Partnership, LLC, or Corporation).
Solo 401k Contribution Deadlines
To reiterate, you are both the employer and employee of your Solo 401(k) and different deadlines and amounts can apply for contributions. It used to be that employee contributions were made in the calendar year and employer contributions could be made up until your tax deadline. Thanks to SECURE 2.0 legislation, there is much more flexibility for self-employed businesses that are structured as either a Sole Proprietorship or a Single-Member LLC.
If you are self-employed and starting your first Solo 401(k), you can start your plan up until your tax deadline for the previous year and still make contributions as an employer. This date is April 15th for most and March 15th for S-Corps and Partnerships. Even better for Sole Proprietorships and Single-Member LLCs, you may also choose to make contributions including Roth 401(k) and catch-up contributions until your tax deadline too. This gives you a lot of flexibility in managing your retirement savings and taxes.
For any business structure, employer contributions as 401(k) profit sharing may be made until your tax deadline.
However, if your company is a S-Corporation, C-Corporation, Partnership, or Multi-Member LLC, and you want to make “employee” contributions including Roth 401(k) or catch-up contributions, the plan must be setup and the contribution(s) made as an employee by 12/31.
To help make this easier to digest, this chart summarizes 2023 Solo 401(k) plan deadlines:
| Business Entity Type | Employee Contributions Deadline | Employer Contributions Deadline |
|---|---|---|
| Sole Proprietors and Single- Member LLCs | 4/15/2024 to fund (Including Roth 401(k) and catch-up contributions) | 4/15/2024 to purchase and fund (all employer contributions must be made on a tax-deferred basis) |
| C-Corps and Multi-Member LLCs | 12/31/2023 | 4/15/2024 |
| S-Corps and Partnerships | 12/31/2023 | 3/15/2024 |
Again, please note that your Solo 401(k) provider will often have purchase and contribution deadlines earlier than the government deadline to ensure your plan is set up to receive qualifying contributions. It can take days to weeks for providers to set up your plan, so plan on purchasing well in advance.
Managing Your Solo 401(k) Contributions
Solo 401(k) owners can typically make one-time contributions on any given business day and are not typically beholden to payroll or other system restrictions. You may also choose to set up automated contributions via an electronic transfer with your bank account (ACH). A smart strategy many users implement is to establish auto-ACH for “employee” contributions during the year to receive regular dollar-cost average investing benefits. Then, after each quarter or at the end of year, you can make one-time contributions or 401(k) profit share for “employer” contributions as you understand your business income, saving, and tax management needs for a given year.
In determining how much you can contribute as an employer, it is typically 25% of W-2 income, 20% of your net schedule C, or the IRS tax table for your entity type. Generally, it will be 20%-25% of your earnings up to the $69,000 2024 contribution limit (or $76,500 if you are 50 years age or more and making catch-up contributions). You can always contribute up to the employee contribution limit ($23,000 in 2024) as long as you earn at least that amount.
Finally, if your business is run on a non-calendar fiscal year, plan establishment date deadlines may vary by 401(k) providers. Most businesses choose to run their plan on a calendar year regardless of their fiscal year given annual contribution rule changes and ease of management.
Takeaways
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Self-employed and owner-only businesses may receive 401(k) benefits by starting a Solo 401(k) plan.
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The Solo 401(k) owner is the employer and the employee, and different deadlines may apply for making these contributions based on your business structure.
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Sole Proprietors and Single-Member LLCs may start a plan and make either employee, employer, or both types of contributions up until their tax deadline (or their provider supported deadline).
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Partnerships, Corporations, and Multi-Member LLCs may make employee contributions up until 12/31 of the current calendar year, and employer contributions until their business tax deadline (assuming a calendar fiscal year).
This is not meant to be tax advice. ShareBuilder 401k does not offer tax or legal advice. Consult with your tax or legal advisor before engaging in specific strategies.