Get Form As 6042 1

The answer to your question: “Is a 401K a traditional IRA?” is no.

Your elective contributions may also be limited based on the terms of your 401(k) plan and are reported as an information item in box 12 of your Form W-2. Refer to Publication 525, Taxable and Nontaxable Income for more information about elective contributions.

The disadvantage of Safe harbor 401(k)s is that they may end up costing employers much more than a traditional 401(k). They are also administratively more complex as compared to traditional 401(k) and require a careful assessment before they are implemented.

Safe harbor 401(k) plans are the most popular type of 401(k) used by small businesses today. Unlike a traditional 401(k) plan, they automatically pass the ADP/ACP and top heavy nondiscrimination tests when mandatory contribution and participant disclosure requirements are met.

If you have a 401(k) plan, contributions you make for yourself (including your employer contribution) are deductible on line 28 of your Form 1040 (excluding elective Roth deferrals). Contributions you make for employees are deductible on line 19 of your Schedule C.

*You pay Social Security (FICA) and Medicare taxes on your 401(k) contributions, but not on any matching employer contributions.

The amounts deferred under your 401(k) plan are reported on your Form W-2, Wage and Tax Statement. Although elective deferrals are not treated as current income for federal income tax purposes, they are included as wages subject to Social Security (FICA), Medicare, and federal unemployment taxes (FUTA).

The 401(k) plan contributions you elect to make come directly out of your salary. Since the contributions are made with pre-tax dollars, your employer does not include these amounts in your taxable income for the year.