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Question on the i401k I set up for myself as an S-corp and Roth

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Lem0nz

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Hi friends,

Have some tax questions and I'm a little lost and this one is probably a little too far into the weeds for me to solve by myself with the internet (I've been trying). I set myself up a an s-corp individual 401k with vanguard after getting my own EIN. It had an option to create a roth account with it and I just clicked yes because there didn't seem to be any cost or downside and I just thought I'd figure it out later. The entire purpose for making the 401k was so I could move my rollover IRA from residency into it to clear out everything except my personal roth IRA so that I can set up to do backdoor roth contributions next year once I have attending salary starting this fall.

My questions are:
What is the roth part of my s-corp 401k? Can I use it? How do I use it? Is there any benefit to using it? Is it $6500 contribution per year to ANY roth, or for my personal roth and now also my 401k roth? Can I contribute to my new individual 401k on top of what I will contribute to my new employer's plan? (I'll be salaried/employed as an attending and will max out both 403 and 457)? If I do contribute, does it have to be a new source of income like locums or surveys or some alternative revenue stream?

Also, maybe just more generically, did I do this right in setting up a 401k as s-corp to move my rollover IRA money to setup for backdoor? Do I need any documentation or paperwork of alternative income to justify making the s-corp? The internet said I could just use money from doing physician surveys or locums money, both of which I had in 2020 and could probably get again in 2021.

Thank you for any help. I got in over my head.
 

Mman

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Hi friends,

Have some tax questions and I'm a little lost and this one is probably a little too far into the weeds for me to solve by myself with the internet (I've been trying). I set myself up a an s-corp individual 401k with vanguard after getting my own EIN. It had an option to create a roth account with it and I just clicked yes because there didn't seem to be any cost or downside and I just thought I'd figure it out later. The entire purpose for making the 401k was so I could move my rollover IRA from residency into it to clear out everything except my personal roth IRA so that I can set up to do backdoor roth contributions next year once I have attending salary starting this fall.

My questions are:
What is the roth part of my s-corp 401k? Can I use it? How do I use it? Is there any benefit to using it? Is it $6500 contribution per year to ANY roth, or for my personal roth and now also my 401k roth? Can I contribute to my new individual 401k on top of what I will contribute to my new employer's plan? (I'll be salaried/employed as an attending and will max out both 403 and 457)? If I do contribute, does it have to be a new source of income like locums or surveys or some alternative revenue stream?

Also, maybe just more generically, did I do this right in setting up a 401k as s-corp to move my rollover IRA money to setup for backdoor? Do I need any documentation or paperwork of alternative income to justify making the s-corp? The internet said I could just use money from doing physician surveys or locums money, both of which I had in 2020 and could probably get again in 2021.

Thank you for any help. I got in over my head.


I would pay an accountant to tell me the real answer.

The cost to getting it wrong can be large.
 
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dpmd

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Hi friends,

Have some tax questions and I'm a little lost and this one is probably a little too far into the weeds for me to solve by myself with the internet (I've been trying). I set myself up a an s-corp individual 401k with vanguard after getting my own EIN. It had an option to create a roth account with it and I just clicked yes because there didn't seem to be any cost or downside and I just thought I'd figure it out later. The entire purpose for making the 401k was so I could move my rollover IRA from residency into it to clear out everything except my personal roth IRA so that I can set up to do backdoor roth contributions next year once I have attending salary starting this fall.

My questions are:
What is the roth part of my s-corp 401k? Can I use it? How do I use it? Is there any benefit to using it? Is it $6500 contribution per year to ANY roth, or for my personal roth and now also my 401k roth? Can I contribute to my new individual 401k on top of what I will contribute to my new employer's plan? (I'll be salaried/employed as an attending and will max out both 403 and 457)? If I do contribute, does it have to be a new source of income like locums or surveys or some alternative revenue stream?

Also, maybe just more generically, did I do this right in setting up a 401k as s-corp to move my rollover IRA money to setup for backdoor? Do I need any documentation or paperwork of alternative income to justify making the s-corp? The internet said I could just use money from doing physician surveys or locums money, both of which I had in 2020 and could probably get again in 2021.

Thank you for any help. I got in over my head.
Why would you pay to create an s corp if you have no incomes stream to justify it? You could have done an individual 401k as a sole proprietor without the cost of incorporating. You will be limited in terms of how much you can put away without self employment income. See How Much Salary Can You Defer if You’re Eligible for More than One Retirement Plan? | Internal Revenue Service for the employee contribution limit discussion. And One Participant 401k Plans | Internal Revenue Service for the employer contribution limits.
 

Lem0nz

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The answer to that is that until your post I thought those two things were synonyms.

Thank you.

Back to the drawing board. On the bright side, I didn't pay anyone anything. Did it myself and it didn't cost anything to set it up at Vanguard.
 
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