As a self-employed person, your employer contributions are based on your earned income for the year. Your actual earned income generally can't be determined until well after the last day of the year – when you are preparing your personal income tax return.
Although you will not know your earned income until after the end of the plan year, you are required to make your elective deferral contribution election for the plan year on or before December 31 of that year. You can learn more about how to request an owner’s draw here and self-employed income for different entity types here.
Once Guideline has your earned income and share of expenses (if your entity is a partnership), we will calculate the combined amount of your elective deferrals (which were likely already deposited), plus your share of any employer matching contributions and/or non-elective contributions to which you are entitled and deposit them in a single sum. If your plan participates in profit sharing, these contributions will be calculated at the same time as profit sharing.
Guideline will prompt administrators of your Guideline plan to confirm your earned income for the previous year through a task on their Guideline administrator dashboard in Q1 of the following year. Once this task is completed, the employer contributions will be automatically processed at the same time as profit sharing, if applicable (once profit sharing expires or is dismissed the amount will be calculated). An email will be sent with the calculated amount, which will provide the administrator five business days to review and request clarification if necessary.
Please note, extensions to the plan sponsor’s tax filing may allow more time to process profit sharing and employer contributions for owner's draws. Any extensions to the original tax deadline should be communicated to Guideline.
This article is for informational purposes only and is not intended to be construed as tax advice. You should consult a professional tax advisor to determine a strategy that fits your needs.