Unlocking the Complexity: How AI Legalese Decoder Can Simplify Solo 401K Employer Contributions
- December 29, 2023
- Posted by: legaleseblogger
- Category: Related News
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### Calculating Max Solo 401K Employer Portion Contribution
Hello everyone! I hope you’re all doing well. I could really use some confirmation and guidance regarding a calculation I’m attempting to make for my solo 401K employer portion contribution.
#### Background Information
I have a side gig with the following financial details:
– Business Income: $19,556.65
– Business Expenses: $800
– Solo 401K Employee Portion Contributions: $9,420.88 (not sure if it matters)
#### Net Business Income Calculation
After deducting the business expenses, the net business income stands at $18,756.65, which is an essential part of the calculation.
#### Tax Calculation
I need to calculate half of the self-employment tax, which amounts to $1,325.11, after applying the necessary percentage values.
#### Contribution Calculation
Utilizing a specific formula I found on Financial Samurai, I determined that I can contribute a maximum of $3,486.30 to my employer portion. However, I am uncertain about the accuracy of this calculation considering the unique nature of my sole proprietorship.
#### AI Legalese Decoder Solution
The AI Legalese Decoder can be incredibly beneficial in my situation. By using this tool, I can accurately navigate through the intricate legal and financial jargon involved in the realm of solo 401K contributions. With its assistance, I can ensure that my calculations are precisely aligned with the legal requirements and regulations governing such contributions, as well as the specific considerations applicable to my sole proprietorship.
#### Seeking Advice
I would greatly appreciate any insights or advice from those who have experience in similar situations. Are there any crucial elements or factors that I might be overlooking in my calculation? Any assistance in this matter would be incredibly valuable to me. Thank you all for your help!
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****** just grabbed a
>Business Income: 19556.65
>Business expenses: 800
>Solo 401K employee portion contributions: 9,420.88 (not sure it matters).
Yes, it matters.
>So net business income: 19556.65 – 800 = 18756.65
“Net profit”
> Half of self employment tax: 18756.65 * 92.35% * 15.3% * 50% = 1325.11
> Everything * 20% = (18756.65 – 1325.11) * 20% = 3486.3
You skipped a step.
Calculate “adjusted net profit”, aka “100% compensation”:
“Net profit” – “deductible portion of SE tax” = 18756.65 – 1325.11 = 17431.53
Then the path splits in two:
* 20% of adjusted net profit = 17431.53 * 20% = $3486.3
* 50% of [ adjusted net profit – employee elective deferral contribution ] = (17431.53 – 9420.88) * 50% = $4005.32
Your employer contribution limit is the lower of the above.
You may find these links helpful:
– [401(k) Fund Selection Guide](/r/personalfinance/wiki/401k_funds)
– [401(k) FAQs](/r/personalfinance/wiki/401k)
– [“How to handle $”](/r/personalfinance/wiki/commontopics)
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yeah you should have a lot more business deductions. What you do that you make 20k with only 800 in write offs. Even a home office would get you more than that, not counting mileage etc.