Self-Employed 401k plan contributions - employee and employer

Question

I started a Self-Employed 401k plan in 2023. Where should the employee and employer contributions be entered? Are they entered as a total amount in one field or separately? Does FreeTaxUSA check for excess contributions (employee and/or employer) for the Self Employed 401k plan? thanks

Austyn · Answer

Hi JRG,

Since your spouse is your employee in your sole proprietorship, here's how to enter the 401(k) contributions:

1. Your own contributions (both employee and employer portions) go under Deductions/Credits > SEP Contributions. Enter the two portions.

2. Contributions you make as the employer for your spouse go on your Schedule C as a business expense. Go to Income > Business Income (Schedule C) > Edit > Common Expenses and enter the amount under "Pension / Profit-Sharing Plans."

One thing to keep in mind: this applies if your spouse is a true W-2 employee (meaning you direct their work and pay them wages). If your spouse is more of a co-owner, the treatment is different. You can read more here:

https://community.freetaxusa.com/kb/articles/160-is-my-spouse-considered-an-employee-or-a-co-owner-and-what-are-the-tax-implications

JRG · Answer

I have a sole proprietorship with my spouse as my only employee. Where do I enter these contributions to the 401(k)?

[Deleted User] · Answer

Hello bogleproof,

Your employer contributions will be entered by clicking Deductions / Credits » SEP contributions. This will be checked for excess contributions.

As for the contributions for your employees, you will enter those as expenses on your schedule C. Specifically, in our site, you will enter it in the Common Expenses portion of the Schedule C. For this portion, you would not be penalized on your personal return if you had employees with excess contributions to their 401k, so our site does not check for that.