As 2026 begins it’s important for Solo 401(k) owners to understand the deadlines and rules for their contributions for 2025. Let’s discuss the critical aspects and dates that Solo 401(k) owners must know. There are three important deadlines you must know if you have a Solo 401(k) or if you plan to set one up still for 2025 that we will cover in this article.
A Solo 401(k) is a retirement plan for small business owners or self-employed persons who have no other full-time employees other than partners or a spouse. It can be fully self-directed into real estate, LLCs, private funds, notes, or other alternative investments, and allows the owner/participants to contribute up to $69,000 per year (far more than a standard IRA).
For 2025 contributions, the employee maximum is $23,000, and the employer’s maximum is $46,000, for a total of $69,000.
2025 Contributions Can Be Made in 2026
Both employee and employer contributions can be made up until the company’s tax return deadline including extensions.
If you have a sole proprietorship (e.g. single-member LLC or Schedule C income) or C-Corporation, then the company tax return deadline is April 15, 2026.
If you have an S-Corporation or partnership LLC, the deadline for 2025 contributions is March 16, 2026.
Both deadlines (March 16 and April 15) may be extended another six months by filing an extension. This is a huge benefit for those that want to make 2025 contributions but who won’t have funds until later in 2026.
However, for sole proprietorships (Schedule C), you can only make employee contributions (aka elective deferrals) until April 15, 2026 (no extensions) for the prior year. The employer portion could still be made up until October 15, 2026 if there was an extension for the personal return of the sole proprietor.
W-2s And Employee Deferrals Force You to Plan Now
While employee and employer contributions may be extended until the company tax return deadline, you will typically need to file a W-2 for your wages (e.g. an S-Corporation) by January 31, 2026.
The W-2 will include your wage income and any deduction for employee retirement plan contributions will be reduced on the W-2 in Box 12.
As a result, you should make your employee contributions (up to $23,000 for 2025) by January 31, 2026, or you should at least determine the amount you plan to contribute so that you can file an accurate W-2 by January 31, 2026.
If you don’t have all or a portion of the funds you plan to contribute available by the time your W-2 is due, you can set the amount you plan to contribute to the 401(k) as an employee contribution, and will then need to make that contribution by the tax return deadline (including extensions).
Example
Now let’s bring this all together and look at an example outlining how this may work. Sally is 44 years old and has an S-Corporation for her online business. She is the sole owner and only employee and had a Solo 401(k) established in 2025. She has $120,000 in net income for the year and takes $50,000 of that as W-2 wages. The remaining $70,000 flows through to her personally via a K-1. Sally has not yet made any 2025 Solo 401(k) contributions but plans to do so to reduce her taxable income and build retirement savings. If she decides to maximize her 2025 contributions, it would look like this:
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- Employee Contributions
The 2025 maximum employee contribution is $23,000. This is dollar for dollar on wages so she can contribute $23,000 as long as she made $23,000. Since Sally has $50,000 in wages from her S-Corp, she can easily make a $23,000 employee contribution. Let’s say that Sally doesn’t have the $23,000 to contribute but will have it available by the tax return deadline (including extensions). What Sally will need to do is let her accountant or payroll company know what she plans to contribute as an employee contribution so that they can properly report the contributions on her payroll and W-2 reporting.
By making a $23,000 employee contribution, Sally has reduced her taxable income on her W-2 from $50,000 to $27,000. This assumes she made a traditional contribution. Roth employee contributions would not reduce the taxable income on the W-2. At even a 30% tax bracket for federal taxes and a 5% tax bracket for state taxes that comes to a tax savings of $8,050.
Example Summary for Sally:
W-2 Wages Contribution to Traditional Solo(k) Income Taxes Due (Assuming 35%) $50,000 $0 $17,500 $50,000 $23,000 $9,450 $8,050 TAX SAVINGS If Sally instead made employee Roth contributions, she would not get the tax deduction but would be building a Roth account that would come out tax-free at retirement. If Sally chooses Roth, she would be reaping the tax benefit later in retirement as she would have no taxes due on distributions from the Roth account.
- Employer Contributions –
The 2025 employer contribution is limited to 25% of W-2 wages, subject to the overall Solo 401(k) contribution limit of $69,000. Since Sally has taken a W-2 wage of $50,000, the company may make an employer contribution of $12,500 (25% of $50,000). This contribution is an expense to the company and is included as an employee benefit expense on the S-Corporation’s tax return (Form 1120S).
In the stated example, Sally would’ve had $70,000 in net profit/income from the company before making the Solo 401(k) contribution. After making the employer matching contribution of $12,500 in this example, Sally would then only receive a K-1 and a net income/profit from the S-Corporation of $57,500. Again, if she were in a 30% federal and a 5% state tax bracket, that would create a tax savings of $4,375.
This employer contribution would need to be made by March 16, 2026 (the company return deadline) or by September 15, 2026, if the company were to file an extension.
In the end, Sally would have contributed and saved $35,500 for retirement ($23,000 employee contribution + $12,500 employer contribution). And she would have saved approximately $12,425 in federal and state taxes between her employee and her employer contributions. That’s a win-win.
Example Summary for Sally’s Business:
Business’s Net Income Employer Contribution to Solo(k) Income Taxes Due (Assuming 35%) $70,000 $0 $24,500 $70,000 $12,500 $20,125 $4,375 TAX SAVINGS
- Employee Contributions
Under the SECURE Act 2.0, you can make employer Roth contributions. The IRS released guidance explaining how to report employer Roth 401(k) contributions in IRS Notice 2024-2. When making an employer Roth contribution, the company takes the deduction as an employee benefit expense and the plan issues a 1099-R to the employee so that in the end there is no tax deduction and the funds are taxed (via the 1099-R), resulting in post-tax Roth funds.
In the case of a Solo 401(k) owner, you get a deduction for the contribution in your business on the company return and then you pick up a 1099-R of income for the amount of the contribution (similar to a Roth conversion). The net result is the same as converting a traditional employer contribution to Roth. The IRS clarified that there is no FICA tax on employer Roth contributions, and as a result they are not reported on the W-2.
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Keep in mind, you need to start making plans now, and begin coordinating with your accountant or payroll company as your yearly wage information on your W-2 (self-employment income for sole props) is critical in determining what you can contribute to your Solo 401(k).
Solo 401(k) Plan Set-Up Deadlines to Make Contributions for 2025
For S-Corp owners, you must have your Solo 401(k) plan set up by December 31, 2025 in order to make the full 2025 contribution of $69,000, and to ensure your employee contribution is reported on Form W-2, which is due January 31, 2026. The total $69,000 contribution limit consists of $23,000 in employee contributions and $46,000 in employer contributions. For S-Corp owners, if you do not have the plan set up by December 31, 2025, you technically cannot make employee contributions, as you weren’t able to elect an employee deferral in 2025.
You can set up your Solo 401(k) after December 31, 2025, and still make 2025 employer contributions. The SECURE Act, which went into law in 2019, allows you to set up your Solo 401(k) by the adopting employer’s tax filing deadline and still make your employer contribution. This timeline includes extensions for all adopting employer entities except for sole proprietorships, who in an odd rule change in SECURE 2.0 can only set up by April 15 for prior-year contributions.
So, if you set up your Solo 401(k) plan on February 1, 2026, you can still make your employer contributions for 2025, which could be up to as much as $46,000, depending on your wage or self-employment income. Also, if you extended your 2025 business return from March 15 to September 15 (S-Corp or partnership), your deadline to establish a new Solo 401(k) plan and to make 2025 employer contributions is September 15, 2026.
For sole proprietors (single-member LLCs), their deadline to establish the Solo 401(k) plan and still make contributions is not December 31, 2025. Instead, for sole proprietors, the deadline is the company tax return deadline (without extension), so you would have until April 15, 2026, to establish the plan and make 2025 contributions.
Keep in mind that while IRAs can be established until April 15, 2026, for 2025 contributions, a Solo 401(k) should be established for S-Corp owners (and C-Corp owners) by December 31, 2025, if you want to make both employee and employer contributions for 2025. Don’t get the IRA and Solo 401(k) deadlines confused, and make sure you’ve got a plan for your specific business. Also, remember the deadline is different for sole proprietorships and general partnerships, as they have until the company return deadline to establish the plan and make new contributions.
We can help in establishing your solo(k) at KKOS Lawyers using our IRS pre-approved solo(k) plan documents where you can self-direct the solo(k) and have checkbook control right out of the plan. We handle statements and reporting as well as IRS-required plan document updates for your solo 401(k) at Directed Trust Company.
Click here to learn more about setting up a Solo 401k at Directed Trust Company.
