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Quick Check on 401k

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    Quick Check on 401k

    My only share holder client had payroll deduction of $13,000 for 401k for 2005.

    I think she can still deduct $29,000 as profit sharing before 09/15. Total limitation is $43,000 for 2005.

    Her Compensation on W-2 is $134,750 (Box 5). Box 1 is 122,750

    Thanks

    #2
    Exmple of 401K

    I believe that 3% of wages - Mandatory in Employer's safeharbour plan portion and then emplyer can have any % for matching.

    (A) Employee #1: Salary (box 5) on w-2 is 174,000
    3% of $174,000 = 5220, PLUS 5.62% (Matching) of $174,000 = 9,780 for a total of $15,000

    (B) Employee #2: Salary (Box 5) on W-2 is 24,206
    3% of $174,000 = 726 PLUS 3.76% (Matching) of $174,000 = 910 for a total of $ 1,636

    So deduct on Line 17 of 1120S - $15,000+$1,636 = $16,636

    Can some one confirm this?

    Thanks!

    Comment


      #3
      The contribution limit for 2005 is $13,000 deferral and 25% of wages up to a limit which I don't have in front of me. I believe the total for age under 50 is 43,000 in 2005.
      Last edited by veritas; 09-07-2006, 08:21 PM.

      Comment


        #4
        Originally posted by veritas
        The contribution limit for 2005 is $13,000 deferral and 25% of wages up to a limit which I don't have in front of me. I believe the total for age under 50 is 43,000 in 2005.
        I think "25% of wages" does not apply to 401 k but it is for sep IRA

        Not sure

        Comment


          #5
          Individual 401K?

          Here is a link to a worksheet I found for Individual 401K. One is for unincorporated businesses and the other for incorporated businesses.



          The contribution limit for 401K individuals is $14,000 for 2005 under age 50 with $4,000 catchup provision over age 50, Maximum contribution between employer and employee for 2005 can not exceed the lesser of 100% of the participant’s compensation or a specific dollar limitation. The dollar limitation is $42,000 in 2005. The amount of compensation that can be taken into account when determining employer and employee contributions is limited. to $210,000 in 2005.

          Sandy

          Comment


            #6
            Sandy,

            You are correct. I am at my office this am and looked up the limits.

            Comment


              #7
              2006 rules individual 401k

              Is it correct that the maximum contribution increased in 2006? I recently looked at an individual 401k plan for taxpayer over age 50 and came up with $20,000 individual contribution and $29,000 company contribution (= 25% of $116,000 salary). This maxed him out at $49,000 for the year.

              Hoping for some confirmation. Thanks.

              Comment


                #8
                Yes. According to the chart on page 1-3 of TTB, the maximum 401(k) contribution increased from $18,000 in 2005 to $20,000 in 2006. The 25% of W-2 wage remains the same.

                Comment

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