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rated:
I am converting myself from W-2 to Corp to Corp employment starting 15th of this month.
I am expecting first payment on C2C at around 31st December as invoicing and billing takes time.

I file joint tax return and the combined gross annual income > 200k which disqualifies from IRA tax benefits.

I have formed my own company at around 15th October. 
What are the possible tax saving strategies for me for 2016. My W-2 employer did not offer me 401k plan for the year.
I can run payroll for myself and thinking that I can open a 401 k and deposit about 18k of my own money.. Is that a good option? or do I need to wait for the first payment of my company before running my own payroll.

Thanks in advance

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rated:
I think you may be eligible to contribute $54k-ish as a self employed individual now, vs W2. However, I don't remember all of the logistics around it. I was in a similar boat a few years ago and I remember this being one of the largest advantages.

https://www.irs.gov/retirement-plans/one-participant-401k-plans

rated:
It is $53,000 for 2016 ($54,000 for 2017) of which, $18k can be elective deferral. The difference is post-tax.

rated:
The question is can I put my own money into it .
My company may not receive payment from vendor before Dec 31.

Thanks

rated:
Even though you didn't state it explicitly, I am assuming you formed an S-Corp. The short answer is yes. You can loan the S-Corp money and use that to make 2016 payroll and pay other expenses. The loan must occur by 12/31/16 in order to deduct the S-Corp's loss.

401k employee elective deferrals must come from payroll paid by 12/31/16. However, there are two rules about depositing deferrals. The DOL has a seven (7) day safe harbor and regulations stipulate that it should occur by the 15th of the following month. As an owner-employee you are probably OK if it is made by the W-2 deadline of 01/31. You have until the corporation's tax filing date including extensions (3/15 or 9/15) to make the 25% employer contribution. Note: 401k contributions and payroll taxes MUST come from a corporate bank account (not personal accounts).

However, there are practical issues with maxing out the $18K this year. You must pay yourself a reasonable salary. The last 1.5 months represents 12.5% of a yearly salary. Your pay for the remainder of this year should roughly approximate a 12.5 % proportion of the yearly salary you plan to pay yourself next year.

You really should have professional assistance in starting up your S-Corp. This is even more so if you are going to attempt a loan to the S-Corp in 2016 and claim a loss from it on your 2016 1040 return.

rated:
btuttle said:   Even though you didn't state it explicitly, I am assuming you formed an S-Corp. The short answer is yes. You can loan the S-Corp money and use that to make 2016 payroll and pay other expenses. The loan must occur by 12/31/16 in order to deduct the S-Corp's loss.

401k employee elective deferrals must come from payroll paid by 12/31/16. However, there are two rules about depositing deferrals. The DOL has a seven (7) day safe harbor and regulations stipulate that it should occur by the 15th of the following month. As an owner-employee you are probably OK if it is made by the W-2 deadline of 01/31. You have until the corporation's tax filing date including extensions (3/15 or 9/15) to make the 25% employer contribution. Note: 401k contributions and payroll taxes MUST come from a corporate bank account (not personal accounts).

However, there are practical issues with maxing out the $18K this year. You must pay yourself a reasonable salary. The last 1.5 months represents 12.5% of a yearly salary. Your pay for the remainder of this year should roughly approximate a 12.5 % proportion of the yearly salary you plan to pay yourself next year.

You really should have professional assistance in starting up your S-Corp. This is even more so if you are going to attempt a loan to the S-Corp in 2016 and claim a loss from it on your 2016 1040 return.

  Thanks a lot. This is a great reply and you have assumed my situation 100%.
Who are the professionals on this? CPA?
Thanks again.

rated:
Plus .. you can add start of costs of S-Corp ... I was in this situation while back, and read up the IRS rules for home office - if you do some admin type of work from home ... like timesheet etc. you can deduct portion of the house used for that purpose. basically - in my case i prorated to be about 1 room out of the entire house; plus cost associated with opening S-corp, in case you bought any computers and such for work ... you should be able to add up fair bit of initial cost.

Net loss will offset against your regular income

rated:
Yes, you should really have a CPA for this year and probably next. Then you can decide if you understand the issues enough to do it yourself. Make sure you engage one now on to handle critical issues before the end of the year. Waiting til tax time could very well be too late.

Just be a little careful in screening the CPA. All CPAs are NOT created equal. We have seen a lot of horror stories of CPAs just not understanding solo 401k plans at all. Also, your particular circumstances involving end of year payroll, Solo 401k deposits, possible loan to S-Corp and deducting the loss. Make sure the CPA understands these issues and what "basis" is in an S-Corp. This is not an everyday issue that a CPA deals with.

Do yourself a favor get IRS publication 535. There is a wealth of information in there. The startup cost issue described by prozario are in chapters 7 & 8. Some people want to leave it all to the CPA, but you are really better of understanding the basic issues yourself. Then you can rely on the CPA for experience of the things that are not in the publications.

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