| Contribution Date | Description | Tax implications for you as EMPLOYER | Tax implications for you as EMPLOYEE |
|---|---|---|---|
| 1/21/2026 | You make an EMPLOYER tax-deferred Individual 401(k) contribution for $15,000 to the plan and can choose to designate it for tax year 2025 or 2026. | You include the $15,000 expense as a deduction for the tax year allocated on your business’ tax return. | Deferred until distributions are taken from the plan upon retirement. |
Traditional Individual 401(k) Employer Profit-Sharing Contributions
- When the EMPLOYER contributes to a Traditional Individual 401(k), it is generally classified as a business expense and taken as a tax deduction on the business' tax return for the year allocated.
- When the EMPLOYEE receives that contribution, it would not be taxable income because the contribution went into a tax-deferred account. Tax liabilities would be incurred as distributions are withdrawn from the plan upon retirement.
Example:
