I tried this route and it was a nightmare. The software technically "allows" you to adjust basis, but doesn't help you calculate what the correct basis should be. I ended up paying a CPA $350 to fix my return after I'd already spent hours trying to figure it out myself.

That's interesting! So are you saying some providers might actually allow employee contributions after December 31st, or is it more about how they classify the contributions internally? Has this approach ever caused issues with the IRS for you?

It's more about how they classify contributions internally. The IRS rules are still the same (employee contributions by Dec 31, employer by tax filing deadline), but some providers don't track the distinction in their system - they just report the total contribution amount. This approach hasn't caused me problems, but it requires careful record-keeping on your end. You need to document what portion was intended as employee vs employer when you file your taxes. The risk is if you exceed your allowed contribution limits for either category. I always consult with my tax professional to ensure my allocations are correct before finalizing my tax return.

Thanks for clarifying this! A lot of people confuse the deadline for establishing the plan with the deadline for contributions. I learned this the hard way last year when I set up my Solo 401(k) in February for the previous tax year, thinking I could still make employee contributions. Expensive lesson!

I do this too! Way easier to just have my primary employer take out an extra $200 per paycheck than mess with the withholding on smaller jobs. Just calculate your expected additional tax from all side gigs, divide by the number of paychecks from your main job, and add that amount to your withholding.

Thanks for confirming this approach! It's worked really well for me. One thing to add - if you go this route, make sure you're not having too much withheld just because it's easier. I review my withholding about halfway through the year to make sure I'm on track.

That's really helpful to hear from someone in almost the exact same situation! I think I'll start with having them withhold $100 from each check and see how that looks. Thanks for the perspective!

Isn't that kind of playing with fire though? I thought the IRS looks closely at businesses that don't make much profit and might consider them hobbies instead of actual businesses?

You're absolutely right to be concerned about the hobby loss rules. The key is having a genuine profit motive and running it like a real business. Keep separate bank accounts, maintain good records, and ideally make a profit in at least 3 of 5 consecutive years. My photography business actually became profitable in year 2, which helped establish it as a legitimate business. If you're just creating a "business" solely to deduct personal expenses with no real intention of making a profit, that's when you're asking for trouble with the IRS. But if you genuinely start a side business related to your expertise where you can legitimately use the equipment, it can work.

I've definitely thought about this approach, but I'm worried about coming across as difficult or not being a "team player." The company culture is very much about "making it work" even when resources are limited. But you're right - maybe I need to be more direct about how this impacts my ability to do the job they're paying me for.

Couldn't this approach create headaches later when you switch to actual bookkeeping software? I imagine there's a lot of manual data entry and potential for errors when migrating from spreadsheets.

You make a valid point about potential migration headaches, but most early startups have such low transaction volume that it's not a major issue. When I migrated from spreadsheets to Wave, I only had about 200 transactions to deal with. It took one afternoon to set everything up properly. The bigger risk actually comes from overcomplicating things early on. I've seen founders spend thousands on comprehensive accounting systems they don't need yet, which diverts precious capital from growth. The spreadsheet approach forces you to understand your finances intimately before you delegate or automate. When you do upgrade, you'll make better decisions about what you actually need versus what's nice to have.

I used Bench for about a year. They're good if you want hands-off bookkeeping and don't have super complex needs. The main limitation I found was with customized reporting - sometimes I needed specific breakdowns for investors that their standard reports didn't provide. Their tax prep add-on was pretty solid though.