Shelter self-employment income with a solo 401(k) or SEP-IRA

  1. Confirm how your business and income are reported
    20 min

    This step produces a one-line verdict on how your business and income are reported — the fact every contribution formula in this guide hangs off. The tricky part is that the verdict comes from your filed tax return, not from the name on your LLC or the way clients pay you.

    1. Open your most recently filed Form 1040 and look for a Schedule C.
    2. If Schedule C is there, read line 31, net profit or (loss). You are a sole proprietor or a single-member LLC taxed as a sole proprietorship, and every contribution will be computed off this figure.
    3. If there is no Schedule C but you receive a W-2 from your own S-corp, note the wages in box 1 — your contributions will be a percentage of those wages.
    4. If you receive a Schedule K-1 from a partnership, note your share of partnership income; you are still eligible, but the math runs off partnership net earnings and any partnership employees must be covered.
    5. Write the verdict at the top of a notes page: Sole proprietor (Schedule C), S-corp owner (W-2), or Partner (K-1).