Larry in TN

If you put 100% into the 401k then there is no 25% withholding, except...

The payroll and state taxes and union dues still apply. Enough money to pay those must be put aside before the 401k contribution is made.

Since the money for the payroll and state taxes and union dues is not being directed into the 401k, federal tax withholding applies. Enough money to cover the 25% withholding on the money deducted for payroll and state taxes and union dues must also be directed for that purpose and is not contributed to the 401k.

Andy

Larry gave a detailed answer but probably wasn't what you were looking for.

If you put 100% into your 401k Pretax, about 90% of your profit sharing amount will go into your 401k. That's close enough for .gov work. Please post the amount you had go into your 401k after it's deposited for future reference.

Winston

Gracias to you both.

I'll revisit this thread with the percent actually deposited once the checks are cut.

Sniper66

90% not a chance


25% + 6.2+ 2.9 will be deducted no matter what .... Fed fixed 25 plus FICA

pilotgolfer

From another forum, someone had suggested this site. I thought it was very useful. I ran the numbers from last year and it appeared to be pretty accurate. The only wrench in the works was that the PS was combined with normal paycheck last year...

https://www.yourmoneypage.com/withhold/md2.php

Enter your PS as supplemental income. You can look at the different tax implications for varying amounts of money going into 401k.

Andy

You've calculated post-tax 401k contribution, not pre-tax.

See the little 'Explanation' box on the various 401k choices?

Here's Pre-tax:
Pre-Tax Contributions
Generally, you may contribute from 1% up to 100% or a fixed dollar amount of your Profit Sharing earnings to your company-sponsored retirement savings account on a pre-tax basis. For U.S. retirement savings accounts, you may make contributions up to the annual IRS deferral limit. For 2017, this IRS limit is $18,000 (for pre-tax and Roth 401(k) contributions combined). However, if you will be age 50 or older in 2017, this IRS limit is $24,000. Your pre-tax contributions are deducted before federal and certain state income withholding taxes are computed (not all states are included). However, these contributions will be subject to Social Security (6.2%), Medicare (1.45%), and applicable state and local tax withholdings.

Here's Post-tax:
Post-Tax Contributions
Generally, you may contribute from 1% up to 100% or a fixed dollar amount of your Profit Sharing earnings to your company-sponsored retirement savings account on a post-tax basis. Your post-tax contributions will have applicable deductions withheld for federal income taxes as well as Social Security (6.2%), Medicare (1.45%), and applicable state and local tax withholdings.


If you really want to get fancy, it should be 9.55% withheld for most of us but 10% is close enough for .gov work. YMMV.
As a corollary, post-tax should be ~1/3 in taxes (34.55%).

Winston

Going back over the MEC emails, it looks like the 25% FED withholding will not apply to any PS amount sent to the 401k (see the second paragraph):

Andy

I suspect that the MEC email is incorrect. Post-tax contributions should be subject to 25% withholding. I'll try to remember to post when my profit sharing is deposited into my PRAP ... I will have maxed out my pre-tax contributions prior to the PS check so my PS will go into PRAP post-tax (you have to max out pretax/Roth contributions prior to being able to make post-tax contributions).

Winston

I read that email as excluding the FED withholding on PS 401k contributions up to the pretax limit, but I do see how the email doesn't make that distinction.

I'm guessing after hitting the $18/24k limit, you'd be subject to the 25% withholding, but how would they know whether or not you're at the limit (or reach it somewhere as a result of the PS contribution) when the checks are paid?

EWRflyr

Hmmm, unless I don't understand your question, computer systems would do it just like they do your calculations throughout the year for your 401K:

Jan 3 + Jan 16 + Feb 1 + Feb 16 401K contributions = X

18,000/24,000 - X = Y (the amount you can still contribute to hit the limit)

PS deferral election = Y?? 401K contributions stop for the year just like they would whenever you hit that limit during the year.

The system is designed to stop at the exact penny you reach the deferral limit.