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Bob is the owner and only employee of an S-corporation. For tax year 2023, he pays himself a salary of $150,000 and elects to defer $22,500 to a one-participant 401(k) plan. Bob also wants to add non-elective deferrals of $37,500 (25% of $150,000). He selects this amount since it appears to be the maximum permitted for a one-participant 401(k) plan and the total contributions of $60,000 will fall within the $66,000 total contribution limits set by the IRS for 2023.

Given the above example, where does Bob need to include this extra $37,500? Would one quarter of the amount ($9,375) be reported on box 2 ("Wages, tips, and other compensation") of each quarterly form 941? Would the full amount be reported on line 17 ("Pension, profit-sharing, etc., plans") of the annual 1120-S? Are there any other impacts to any other forms?

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  • The corporation and s-corporation tags each have more than a hundred questions associated with them, so it doesn't seem like an unreasonable question to ask. Also, the answer will definitely have a direct impact on Bob's personal finances.
    – jstricker
    Feb 2 at 14:34

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In this scenario, the $37,500 non-elective employer contribution would not be reported on box 2 of the quarterly form 941. Instead, the full amount would be reported on line 17 of the annual 1120-S form as a contribution to the solo 401(k) plan.

Additionally, the contribution may have an impact on other forms such as:

  1. Form 5500-SF: A one-participant 401(k) plan must file a Form 5500-SF annually if the total plan assets exceed $250,000. The contribution amount would be reported on the form.

  2. Form 1099-R: If Bob takes a distribution from the 401(k) plan, a Form 1099-R will be issued to report the distribution to the IRS and Bob. The contribution would be included in the taxable income on the form.

  3. Form W-2: The contribution would not be included in Bob's taxable income on his W-2 form as it is a pre-tax contribution to the 401(k) plan.

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  • Based on the instructions for box 2 on form 941 ("Enter amounts on line 2 that would also be included in box 1 of your employees' Forms W-2"), I'm inclined to think you're correct that the amount is not reported there. It seems like the employer non-elective contribution is doubly good for Bob (considered an expense for the company which would likely reduce Bob's taxes and allows Bob to contribute significantly more to his 401k).
    – jstricker
    Feb 4 at 20:36

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