Solo 401k Deadlines

Eligibility

As long as there are no non-owner employees, most self-employed individuals, business owners, and couples running a business together are eligible to open a Solo 401k. More info can be found here, or for questions specific to your situation check with your CPA or tax professional.

Contribution limits

In 2024, the maximum contribution is $23,000 as the employee, plus an additional 25% of compensation as the employer. The total contribution limit is $69,000, plus an additional $7,500 catch-up contribution for those 50 or older.

More information on how to make a contribution in your Solo 401k can be found here and calculating your contribution limit here.

Plan options

Solo 401ks offer both Pre-Tax and Roth options, each with its own tax advantages. Here’s a step by step guide to setting up a Solo 401k with Carry.

You also have the option to do a Solo 401k Mega Backdoor Roth conversion which you can learn more about here. The Mega Backdoor Roth allows you to bypass the Roth Solo 401k contribution limits by contributing to an After-Tax account first, and then immediately transferring the funds over into a Roth Solo 401k.

EACA Tax Credit

The Eligible Automatic Contribution Arrangements (EACA) is a small business tax credit offering **$1,500 in tax credits to anyone with a Solo 401k Plan with auto-contributions enabled.

This means that if you set up a Solo 401k with Carry, with auto-contributions enabled, and receive $500/year in tax credits for the first 3 plan years. Learn more about setting this up here.

According to the IRS your plan should be set up and a contribution “election” should be made by December 31.

*This deadline is for new Solo 401k plan opening and elections (employee pre-tax or Roth salary deferral elections) only.

Since we need to process your Solo 401k application, our deadlines vary based on different circumstances:

• Opening a new Carry Solo 401k plan and making a contribution election (Deadline: December 31 by Midnight)

  • That means if you set it up yourself you’re good for the year, as long as you make an election

• Transferring or opening a Solo 401k plan that falls under any of these categories (Deadline: Tuesday, Dec 24 - 5 days before the IRS deadlines)

  • Spousal Plan (adding a spouse to an existing Solo 401k, creating a new Solo 401k with your spouse)

  • Plan Transfer or Restatement (moving a plan document from another provider; note that this only moves the plan document, and any funds can take a period of weeks to roll over, depending on the outgoing custodian’s processes and requirements)

We recommend setting up your Solo 401k by at least Dec 24 (5 days before the IRS deadline) to avoid any typical delays in various steps of the process. These include:

• Any questions you have during the setup process, that require a response from our support team (support@carry.com) or your accountant or tax professional

• Transferring a plan, restating a plan, or adding a spouse to your Solo 401k plan

This gives you buffer time to navigate the process without the stress of a looming deadline.

Business Type: Sole Proprietorship (or LLC taxed as a Sole Proprietorship) in first year of plan (i.e., a new Solo 401k plan, not a restated or existing one)

In most cases, for an unincorporated sole proprietorship or a single member LLC taxed as a sole proprietorship/pass-through, you can set up a new Solo 401k plan (if you have never had one before) for the preceding calendar year, up until the earlier of when you file your taxes or the tax filing due date without extensions. This is a relatively recent change, that was introduced by the SECURE Act, and updated in SECURE 2.0.

The plan start date (typically January of the first plan year), which is a required field to set up a Solo 401k plan, will govern what years of compensation are eligible to be contributed. You cannot contribute dollars to a Solo 401k plan before the plan start date, or before your business or self-employment’s start date.

Solo 401k contributions broadly fall into either employee contributions (employee pre-tax or Roth elective salary deferrals) or employer contributions (employer pre-tax profit-sharing contributions). You can read more about the differences here.

Employee contributions: These generally must be "elected," or decided, before 12/31 of each calendar year. For example, the deadline to elect a 2023 contribution was December 31, 2023. The election represents a ceiling, but not a floor - there is no penalty for electing an amount, but not fully funding it. You can make the election in the Carry application, or offline in your own records. The election does not need to be filed or submitted anywhere, it should just be kept on hand in case you are ever audited.

Exception: The one exception to the election deadline is for sole proprietorships in the first year of the plan. Recent legislation (SECURE 2.0) allowed for retroactive first-year elective deferrals, for sole proprietorships in their first plan year.

If you did not make an election for a prior year and are not eligible for the exception, you may still be able to make contributions in the form of “employer” pre-tax contributions and employee voluntary after-tax (non-Roth) contributions (aka “mega backdoor Roth contributions”), as these are not dependent on making an election.

In all cases, you should confirm that the amounts you are contributing are under your annual contribution limits, which are income dependent and change for each tax year, and that you accurately report the final contribution amounts on both your business/self-employment and individual tax returns.

The earlier of when you file your taxes, or the tax filing due date WITHOUT extensions if leveraging retroactive first year elective deferrals; otherwise, tax filing due date with extensions.

Business Type: Sole Proprietorship (or LLC taxed as a Sole Proprietorship) in subsequent year of plan (i.e., not a new Solo 401k plan), Partnership, LLC taxed as an S-Corp/Partnership, or C Corp

End of calendar year for the current year (e.g., Dec. 31, 2024 for the 2024 calendar year)

End of calendar year for the current year (e.g., Dec. 31, 2024 for the 2024 calendar year)

The earlier of when you file your taxes, with extensions for:

1. For employee optional after-tax (aka MBDR), the deadline to deposit funds is the tax filing due date plus any timely filed extensions.

2. For employer pre-tax contributions (aka profit-sharing contributions), deadline is tax filing due date plus any extensions you file, however may require a corrected W2 (if your Solo 401k contributions are based on W2 income) if contribution amounts are changed during or after December (the exact deadline varies by payroll company), and the W2 did not account for the final contribution amounts.

3. For employee pre-tax and Roth contributions (aka employee elective salary deferral contributions), deadline to deposit funds (if contributions are elected by 12/31) is the tax filing due date plus extensions, however this may require a corrected W2 as well.

What is a Solo 401k election?

A Solo 401k election is simply a written form or document for how much in employee contributions (aka “employee elective salary deferrals”) you want to make, and to which accounts it should go towards (pre-tax or Roth). In most cases, the election should be made prior to your salary or compensation being paid out.

Since you are the employer and employee, you’re essentially writing a signed, dated note to yourself on the amounts you are going to contribute as an employee, and keeping it on file yourself for your own records, in case the IRS ever asks for it.

If you’re a Carry Solo 401k user, you can find an electronic contribution election form inside your Carry account by going to Solo 401k → the Contributions tab at the top.

Why is it important?

A written election can help you clearly establish that your plan is operating in compliance with the tax code. It can also help you plan ahead and ensure you do not accidentally over-contribute.

What if I make a Solo 401k election but don’t make the full contribution by the deadline?

That is completely fine. You are allowed to contribute less than your elected amount (but not more). The elections are typically maintained for audits and to prove that you do intend to contribute, and that you do not contribute more than you claim. However, your actual contributions will be the amounts used to reconcile for tax purposes, and are what should be included on your filed tax return.

How do I make a Solo 401k election?

A simple signed, dated note to yourself with the different amounts you want to contribute is usually sufficient. Inside Carry you can find an electronic contribution election form, which you can download and print as well from the Documents section (click your profile icon in the top right → Documents).