When Are Solo 401k Contributions Due?

A Solo 401(k) plan is a retirement savings tool for self-employed individuals and business owners who do not have any employees, other than a spouse. This structure allows the owner to contribute as both the “employee” and the “employer,” enabling significant savings potential. Understanding the specific deadlines for setting up the plan and making contributions is necessary for maximizing its benefits and ensuring compliance with tax regulations. The timing for these actions involves several key dates that business owners must track.

Solo 401k Plan Establishment Deadline

The first deadline for a Solo 401(k) is to formally establish the plan. For a business owner to make an employee contribution, also known as an elective deferral, for a specific tax year, the plan documents must be signed and adopted by December 31 of that year. You do not have to fund the plan by this date, but the legal paperwork creating the plan must be executed.

A change under the SECURE Act introduced more flexibility for establishing a plan to make employer contributions. A new plan can be established as late as the business’s tax filing deadline, including extensions, for the purpose of making employer profit-sharing contributions for the prior year. This means if you miss the December 31 deadline, you can still set up a plan in the following year and make an employer contribution for the year that has already passed.

Employee Contribution Deadlines

The “employee” contribution, or elective deferral, is the first type to consider. For businesses structured as S-Corporations or C-Corporations, the owner must formally elect to defer a portion of their salary by December 31 of the tax year. The actual funding of that contribution can be made anytime up until the business’s tax filing deadline, including extensions.

The rules are more flexible for sole proprietorships and single-member LLCs. For these unincorporated businesses, the deadline to both elect and fund the employee contribution is their tax filing deadline, including extensions. This gives these business owners additional time to make their employee deferrals after the year has closed.

Employer Contribution Deadlines

The second type of contribution a business owner can make to a Solo 401(k) is the “employer” contribution, also referred to as a profit-sharing or nonelective contribution. In this role, the business owner acts as the company, contributing a portion of the business’s profits into the retirement plan.

Employer contributions must be made by the due date of the business’s income tax return for the year the contribution is for. This deadline can be pushed even further if the business files for a tax extension. By filing the appropriate extension form with the IRS, the deadline to make the employer contribution is automatically moved to the extended tax filing due date.

Impact of Business Structure and Tax Extensions

The specific dates for employer contribution deadlines are tied to the business’s legal structure and its corresponding tax filing schedule. Understanding these dates is important for timely funding of the employer portion of a Solo 401(k). The ability to extend these deadlines provides flexibility in managing cash flow and tax strategy.

Sole Proprietorships and Single-Member LLCs

For a sole proprietorship or a single-member LLC that is taxed as a disregarded entity, the business’s financial activity is reported on the owner’s personal tax return, Form 1040. The initial deadline to file this return and make the employer contribution is April 15. If the owner files for a six-month extension using Form 4868, the deadline for both filing the tax return and making the employer contribution is extended to October 15.

Partnerships and S-Corporations

Partnerships, including multi-member LLCs taxed as partnerships, and S-Corporations have an earlier tax filing deadline. These entities must file their business tax returns by March 15. This is also the deadline for making the employer contribution to a Solo 401(k). By filing for an extension using Form 7004, these businesses can push their filing and contribution deadline six months to September 15.

C-Corporations

A C-Corporation’s tax return is due on April 15, which aligns with the deadline for sole proprietors. Therefore, the initial deadline for a C-Corporation to make its employer contribution is April 15. Should the corporation file for a six-month extension, also using Form 7004, the final deadline to make the employer contribution moves to October 15.