Question

If I annualize my self-employment income, but contribute to 401k at the end of the year, can I deduct my contributions from my annualized AGI?

Forum|Forum|2 years ago
February 4, 2024
2 replies
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Hi,
I had self-employment income in the first quarter of tax year 2023. I did not make any estimated tax payments. In early 2024, I am contributing this income as elective deferral to individual 401k account. When I annualize my income, can I report the self-employment income from the first quarter of 2023 as 0 given that the entire amount is being contributed to the pretax 401k account?

A

affordable2020

If you earned self employment income and had to pay self employment taxes . Then you contributed to your 401k with the remains. You have to recognize the taxes on self employed work which is your social security tax and Medicare tax .

PatriciaV

The 401K contribution does not offset the self-employment income in the first quarter for the annualized income method. This is especially true because you are making the contribution after the end of the related tax year.

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