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My employer stopped withholding during some restructuring of the business entity, I already maxed out my 5k IRA contribution, I realize I can tax defer another 15k or so in a 401k... how do I simply put portions aside into a 401k.

Do I need a special kind of account so I can show the IRS "look look I swear I dont owe you guys this much there it is". My understanding with 401k's is that the employer usually handles the 401k fund but I'll be doing it myself

This will only lower my tax footprint, but its really just to keep track of things now that I have access to the other half of my paycheck

thanks!

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    What do you mean by "employer stopped withholding"? Does the company offer a 401(k) or not? Can you better explain what was going on before? – JoeTaxpayer Sep 21 '11 at 14:43
  • Lets say you make $1000 per pay period. The check you receive will be $700 or so after all of the state and federal deductions that the employer withholds. Well my employer stopped doing this and is giving me the entire $1000 . I do the calculations myself and seperate out the other $$ for taxes. But anything I can do to lower my tax burden is interesting as well. I already maxed out my IRA contribution so now I'm looking into 401k – valueman Sep 21 '11 at 20:16
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    I'm sorry - Are you saying your employer stopped withholding Federal, State, and maybe even FICA (social security)? You have a major payroll dept issue. But you never responded - does your company offer a 401(k)? They withhold for it, not you. Go to HR or payroll guy. – JoeTaxpayer Sep 21 '11 at 20:20
  • That's correct, they give me the gross paycheck. No the company does not offer a 401(k). I calculate how much should have been withheld and separate the money aside so that I can either fund a tax deferred account and do the deduction on my total taxes later, OR so that I can send a check to the IRS next year (you know, like people used to do before employer withholding) – valueman Sep 22 '11 at 0:16
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You can't be doing it yourself. Only your employer can do it. If the employer doesn't provide the option - switch employers.

The only way for you to do it yourself is if you're the employer, i.e.: self-employed.

  • okay, the employer is treating me as a contractor right now, thats basically self employed yes? – valueman Sep 21 '11 at 20:17
  • @valueman - you have to have employer tax ID. If you do - then yes, you can open a 401K. If they just give you the check without withholding anything, that doesn't make you self-employed, it just makes you owe taxes to the IRS. – littleadv Sep 21 '11 at 22:03
  • thats fine, as long as I am not spending that part of the paycheck I can just send it to the IRS next year, but if I can fund a tax deferred account that would be good too. – valueman Sep 22 '11 at 0:17
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    I'll answer here - If you are an independent contractor, you can go to a broker (I use Schwab, and know they do solo- 401(k)) and set up the account. But, perhaps more important. You do not square up with the IRS in April. As self-employed, you file quarterly installments, estimating the tax due four times, then getting it exact in April. – JoeTaxpayer Sep 22 '11 at 0:32

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