Contribution Deadlines: When Must You Pay to Get the Deduction?
In the tax world, timing is everything. For Solo 401k owners, there are two dates that matter: December 31 and April 15. Confusing them is expensive. If you miss the December deadline, you might lose the chance to contribute the “Employee” portion entirely. If you miss the April deadline, you face penalties. But here is the secret: You can legally delay writing the check until October 15 if you file a simple paper form. Here is the calendar strategy to maximize your cash flow while securing your deduction.
The calendar is your boss: Sign by Dec 31, Fund by April (or October).
1. The Critical Timeline (2025 Tax Year)
Don’t mix up “Signing” with “Paying.”
| Date | Action | Requirement |
|---|---|---|
| Dec 31, 2025 | Deadline 1 | |
| Apr 15, 2026 | Deadline 2 | |
| Oct 15, 2026 | Final Call |
2. Warning: The S-Corp “Payroll” Trap
S-Corps have a stricter rule than Sole Proprietors.
- Employee Side: Must be deducted from W-2 payroll BY DEC 31. You cannot write a personal check for this in April.
- Employer Side: Can be deposited up until filing deadline (Apr/Oct).
- Employee Side: Considered “funded” when you file taxes. Can deposit by filing deadline (Apr/Oct).
- Employer Side: Can deposit by filing deadline (Apr/Oct).
3. Strategy: The “Extension” Cash Flow Hack
Why pay in April if you can keep the cash in your business until October?
- The Move: Even if you are ready to file your taxes in April, you can file an Automatic Extension (Form 4868).
- The Benefit: This legally pushes your Solo 401k funding deadline to October 15.
- The Result: You get 6 months of interest-free “loan” on that $72,000 contribution. You can use that cash for inventory or operations over the summer, then deposit it into the 401k just before October 15.
4. Did SECURE 2.0 Change the Deadline?
Yes, but be careful.
⚠️ The “First Year” Exception
SECURE 2.0 allows Sole Proprietors to open a new Solo 401k after the year ends (up to the filing deadline) and still make Employer Profit Sharing contributions.
- However: Most experts agree you still cannot make Employee Deferrals ($24,500) if the election wasn’t signed by Dec 31.
- Verdict: To get the full $72,000 deduction, stick to the Dec 31 setup rule. Don’t rely on the retroactive exception unless you have no other choice.