sunshine

Many times a 401(k) will be a better choice than a SEP. But it doesn't look like this is one of them. I agree with Belgarath. I chose solo-401K plan (from etrade) over SEP-IRA as 401K allows me to take a loan up to 50% of the amount without penalty. I'd prefer SEP if not for the loan provision.

I made 200K as a self-employed consultant for Year 2015. I formed a single-owner S-Corp and pay myself 100K as W2 wages and the rest 100K is passed to me as dividends that I believe is not subject to payroll tax. I want to put away $25K as part of retirement savings. I opened up a Solo-401K with ETrade and I am allowed to contribute $18K as 'employee pre-tax salary deferral' and 'employer' can contribute upto $25K (25% of my W2-wages) as profit-sharing. My question: Does it matter what split I use to make up a total of $25K for my 401K? My CPA suggests that the split be salary deferral: $1K and employer contributed profit-sharing: $24K 1. Do I save any FICA or self-employment tax by having 'pre-tax salary deferral: 1K and employer profit sharing:24K' versus say 'salary deferral: 18K and employer profit sharing contribution: 7K'. My CPA claims I can save some on FICA by having 1k:24k split but I don't understand how and he don't have much experience with s-corp/solo 401k 2. Is it legal and OK to have 'Salary deferral: 1K and profit sharing:24K'? My solo 401k plan document from etrade says Employer Profit Sharing Contributions will be allocated to all Qualifying Participants using a pro rata allocation formula. Its a single-employee s-corp. My CPA has to run the appropriate payroll for whatever salary deferral I chose, so am stuck and racing against time at this point. Any help is much appreciated.