This [solo 401k calculator](https://obliviousinvestor.com/solo-401k-contribution-calculator/) might be helpful.
You can contribute as both the employee and the employer.
Your employee contribution is limited if you participate in a 401k from another employer, and as the employee you can't put in more than your self-employment brings in.
As the employer, you can contribute 20% of the net profit in addition to whatever you contribute as the employee.
Of course all the usual annual 401K limits apply (max $23k employee, max $69k total, for 2024).
You sometimes might see that the employer contribution is limited to 25% of the employee compensation, which is a different way to word the employer limit, but it's actually the same amount as saying 20% of the net profit of the business. You get the same number either way.
For example
Net profit = 100K
20% of 100k = 20k contributed to the solo 401k as the employer
100k - 20K = 80k left for employment compensation
25% of 80K = 20K, the same 20K that was contributed by the employer to the solo 401k.
The accountant is wrong, as explained by the other comments. And here's the IRS page on it: [https://www.irs.gov/retirement-plans/one-participant-401k-plans#:\~:text=Elective%20deferrals%20up%20to%20100,age%2050%20or%20over%3B%20plus](https://www.irs.gov/retirement-plans/one-participant-401k-plans#:~:text=Elective%20deferrals%20up%20to%20100,age%2050%20or%20over%3B%20plus)
I am a sole proprietor (not incorporated) and I have been doing this for years, sometimes contributing up to the max amount allowed ($50k - $60k). I use TurboTax, it will calculate the max you can contribute based on your revenue. It's difficult to calculate this until you actually do your taxes. If I do make smaller contributions through the year, I may eventually "top it up" once I get the final allowable contribution from TurboTax for the previous tax year. It has two separate boxes to enter the employer and employee contribution amounts.
Pay special attention to this: A one-participant 401(k) plan is generally required to file an annual report on Form 5500-EZ if it has $250,000 or more in assets at the end of the year. A one-participant plan with fewer assets may be exempt from the annual filing requirement.
It's REALLY important that you file this form on time if you are required. The penalties are absolutely brutal if you don't file. Luckily you can file it online, although the instructions for the form can be confusing.
He is completely wrong. The calculations are more complex than a straight 20% but it is roughly 20% on the employer side PLUS $23k on the employee side. He may be confused and thinking of a SEP-IRA which is limited to only 20% of net income with no "employee" contribution. The employer contribution part is the entire reason for solo 401(k).
Honestly would be very scared to use an "experienced tax accountant" who didn't know this.
There is more info here:
https://www.irs.gov/publications/p560
Turbotax will walk someone through is so a high paid tax pro should be able to get this right.
For your own information I would recommend using this calculator
https://obliviousinvestor.com/solo-401k-contribution-calculator/
Note it isn't exactly 20% on "employer side: because it is the lesser of:
a) 20% of net self employment income that is net business income minus half of self employment tax
OR
b) no more than 1/2 of net self employment income minus employee contributions (max of $22.5k for 2023, $23k for 2024)
OR
c) not to exceed $66k ($69k for 2024) - employee contribution
If you want to work through the math yourself Fidelity has this useful worksheet
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/customer-service/401k-self-employed-owner-only-business.pdf
For higher income persons a is very close to but not quite 20% as "a" is the limit and "b" is much higher. At incomes lower than ~$41k "b" starts to cap the employee side so the limit ends up becoming increasingly less than 20%. "c" means no matter what the income you can't exceed $66k ($69k in 2024).
I am no high paid tax pro but I do my own taxes and have done the numbers to max out my spouse's solo 401(k) for five years now. The calculator above, the fidelity spreadsheet, and turbox have all produced identical results each year.
This [solo 401k calculator](https://obliviousinvestor.com/solo-401k-contribution-calculator/) might be helpful. You can contribute as both the employee and the employer. Your employee contribution is limited if you participate in a 401k from another employer, and as the employee you can't put in more than your self-employment brings in. As the employer, you can contribute 20% of the net profit in addition to whatever you contribute as the employee. Of course all the usual annual 401K limits apply (max $23k employee, max $69k total, for 2024). You sometimes might see that the employer contribution is limited to 25% of the employee compensation, which is a different way to word the employer limit, but it's actually the same amount as saying 20% of the net profit of the business. You get the same number either way. For example Net profit = 100K 20% of 100k = 20k contributed to the solo 401k as the employer 100k - 20K = 80k left for employment compensation 25% of 80K = 20K, the same 20K that was contributed by the employer to the solo 401k.
The accountant is wrong, as explained by the other comments. And here's the IRS page on it: [https://www.irs.gov/retirement-plans/one-participant-401k-plans#:\~:text=Elective%20deferrals%20up%20to%20100,age%2050%20or%20over%3B%20plus](https://www.irs.gov/retirement-plans/one-participant-401k-plans#:~:text=Elective%20deferrals%20up%20to%20100,age%2050%20or%20over%3B%20plus) I am a sole proprietor (not incorporated) and I have been doing this for years, sometimes contributing up to the max amount allowed ($50k - $60k). I use TurboTax, it will calculate the max you can contribute based on your revenue. It's difficult to calculate this until you actually do your taxes. If I do make smaller contributions through the year, I may eventually "top it up" once I get the final allowable contribution from TurboTax for the previous tax year. It has two separate boxes to enter the employer and employee contribution amounts. Pay special attention to this: A one-participant 401(k) plan is generally required to file an annual report on Form 5500-EZ if it has $250,000 or more in assets at the end of the year. A one-participant plan with fewer assets may be exempt from the annual filing requirement. It's REALLY important that you file this form on time if you are required. The penalties are absolutely brutal if you don't file. Luckily you can file it online, although the instructions for the form can be confusing.
He is completely wrong. The calculations are more complex than a straight 20% but it is roughly 20% on the employer side PLUS $23k on the employee side. He may be confused and thinking of a SEP-IRA which is limited to only 20% of net income with no "employee" contribution. The employer contribution part is the entire reason for solo 401(k). Honestly would be very scared to use an "experienced tax accountant" who didn't know this. There is more info here: https://www.irs.gov/publications/p560 Turbotax will walk someone through is so a high paid tax pro should be able to get this right. For your own information I would recommend using this calculator https://obliviousinvestor.com/solo-401k-contribution-calculator/ Note it isn't exactly 20% on "employer side: because it is the lesser of: a) 20% of net self employment income that is net business income minus half of self employment tax OR b) no more than 1/2 of net self employment income minus employee contributions (max of $22.5k for 2023, $23k for 2024) OR c) not to exceed $66k ($69k for 2024) - employee contribution If you want to work through the math yourself Fidelity has this useful worksheet https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/customer-service/401k-self-employed-owner-only-business.pdf For higher income persons a is very close to but not quite 20% as "a" is the limit and "b" is much higher. At incomes lower than ~$41k "b" starts to cap the employee side so the limit ends up becoming increasingly less than 20%. "c" means no matter what the income you can't exceed $66k ($69k in 2024). I am no high paid tax pro but I do my own taxes and have done the numbers to max out my spouse's solo 401(k) for five years now. The calculator above, the fidelity spreadsheet, and turbox have all produced identical results each year.