Contributions from my corporation

Can you please explain how to make contributions to my 401k from my corporation. Can I get paid by the corporation as an independent contractor via 1099 and then claim the state taxes on my personal return or do I need to do the payroll deductions and submit them to the state?

Answer:

Since your 401k plan is sponsored by the corporation, all employee elective deferrals must be made through the payroll.

Profit sharing contributions are made by the company and are 100% deductible.

Since you own a corporation you must take reasonable salary, please consult your CPA or tax advisor for details. Be sure to inform your payroll service provider (payroll company or your CPA) that you intend to make contributions into the 401k. Contributions made by the employee must be reflected on the payroll and the funds must be deposited to 401k account within 7 days of payroll.

Below is an example of a paystub showing the deduction from wages, into the Roth 401k:

Below is an example of the W2 showing $18,000 contribution made to a Roth 401k in the box 12a:

(In the example below there are Roth contributions (Box 12a code AA). In this case, the amount would be included in box 1. If the deferrals are pre-tax the code used in box 12a would be "D" and then amount in box 1 would be reduced by the amount in box 12a.)