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Solutions for Self-employed & Sole Proprietorships

There are many benefits of a retirement plan for workers and business owners. When you’re self-employed you fill both of these categories, which means you could have significant 401(k) savings potential. Let Paychex Solo* help you make the most of being self-employed by making it easier to save for retirement and minimize taxes. 

Maximize 401(k) savings as both employer and employee

In 2020, you can set aside up to $57,000 (limit is the total an employee can receive from all contributions, employee and employer contributions), plus a $6,500 catch-up contribution if you’re over 50.

Prepare Now for the Years Ahead

In uncertain times, give yourself a secure retirement savings vehicle.

Prepare for your future by getting started with Paychex Solo.

Incorporation and Startup Services

Paychex Solo includes your choice of two filings of any of the following services through our partner, MyCorporation®:

  • State IDs
  • Business licenses ((DBA or city business license)
  • Corporate formations
  • Federal tax IDs
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Self-employed 401(k) Services: the earlier you start, the more you could save 

The greatest advantage of Paychex Solo for owner-only businesses is that you can make significant 401(k) contributions as both employer and employee — making the most of your retirement contribution and tax breaks on business deductions.

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Integrated Payroll Services

Integrating your 401(k) with payroll services means your solo 401(k) contributions are withdrawn on a pre-tax basis, allowing you to build your retirement savings while saving on federal and state taxes. If you ever decide to hire employees, Paychex services can scale with your business.

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Payroll and Tax Savings

Paychex Solo helps you save on self-employment taxes by making it easy to pay yourself a salary and establish your business as an S-corporation. Tax benefits of becoming an S-corp:

  • Taxes are taken directly from your paycheck, making them easier to manage
  • Deduct your salary to reduce your taxable income
  • You don’t have to pay Federal Insurance Contributions Act (FICA) taxes on income earned beyond your reasonable salary amount, which may be a significant savings
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Self-employed Retirement and Payroll FAQ

  • How do I set up self-employment payroll?

    How do I set up self-employment payroll?

    Paychex Solo can provide you with a simple, efficient way to pay yourself wages as an employee of your own business when you’re incorporated as an LLC or S-corp. This includes options for direct deposit and helping file IRS Forms W-4 and W-2.

  • What is the self-employment tax?

    What is the self-employment tax?

    The self-employment tax is a combination of the employer and employee shares of FICA tax applying to net earnings. It helps solopreneurs build Social Security and Medicare credits.

  • How much are payroll taxes for self-employed business owners and how do I calculate them?

    How much are payroll taxes for self-employed business owners and how do I calculate them?

    The current rates for the self-employment tax are 12.4% for Social Security and 2.9% for Medicare. While 12.4% applies to net earnings up to the wage base for the Social Security Tax ($132,900), 2.9% has no earnings ceiling.

    Example:

    If:

    Revenue – Deductible expenses = $150,000

    Then:

    Self-employed payroll tax = ($132,900 x 12.4) + ($150,000 x 2.9) = $20,829.60

    If you earn additional wages from a job, they must also be included up to the wage ceiling for Social Security and up to the full revenue, minus deductible expenses for Medicare.

  • Are there self-employment tax deductions?

    Are there self-employment tax deductions?

    Yes, one half of the self-employment tax is deductible from gross income whether or not you itemize your personal deductions. It is not subtracted from your business income.

  • What is a solo 401(k)?

    What is a solo 401(k)?

    A solo 401(k) is a retirement plan that is specifically created for use by a self-employed individual. It offers these solo entrepreneurs the retirement and tax-saving benefits of a 401(k) while making it easy to establish and manage a plan. A solo 401(k) is offered as part of Paychex Solo, along with payroll and incorporation services to help you save on taxes while you save for retirement.

  • How much can I contribute with a solo 401(k)?

    How much can I contribute with a solo 401(k)?

    In 2020, an owner-only 401(k) allows you to contribute a maximum of $57,000, plus a $6,500 catch-up contribution if you are over the age of 50. This limit is the total an employee can receive from all contributions, employee and employer contributions.

  • Who does a solo 401(k) cover?

    Who does a solo 401(k) cover?

    A solo 401(k) may provide retirement savings for a self-employed individual and their spouse. No employees may be covered by a solo 401(k) unless they happen to be dependents of the owner.

  • Who is eligible for solo 401(k), payroll, and incorporation services as part of Paychex Solo?

    Who is eligible for solo 401(k), payroll, and incorporation services as part of Paychex Solo?

    If you’re self-employed, you may establish payroll and a solo 401(k) through Paychex Solo if you do not have any employees, are incorporated, and you meet general 401(k) plan qualification requirements. Our incorporation services can help you with the filings necessary to start the process.

  • Do I need an EIN to set up a solo 401(k) and payroll?

    Do I need an EIN to set up a solo 401(k) and payroll?

    Yes. Before establishing payroll and contributing to a solo 401(k), a self-employed individual must obtain an EIN from the IRS. Paychex Solo includes incorporation services that can help you establish an EIN to take advantage of our solo 401(k) and payroll services.

  • Can I have a solo 401(k) if I have employees?

    Can I have a solo 401(k) if I have employees?

    It depends. A solo 401(k) is intended for use by a self-employed individual with no employees. However, if your spouse works for you, they would be covered under a solo 401(k) as a dependent. Children and other family members are not eligible.

  • Can a Form 1099 independent contractor benefit from the solo 401(k) in Paychex Solo?

    Can a Form 1099 independent contractor benefit from the solo 401(k) in Paychex Solo?

    Yes. Independent contractors are self-employed individuals. Everything in Paychex Solo, including the solo 401(k), was created specifically for sole proprietors like 1099 independent contractors.

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