How to contribute to a 401k from my side consulting work on 1099? Need help with self-employed retirement options

You've got a few options for your self-employed income! The most popular choices are a Solo 401(k) or a SEP IRA. For maximizing contributions, a Solo 401(k) is probably your best bet. Since you're already maxing your employer 401(k), you can't contribute more as an "employee" ($23,000 for 2025), but you CAN still make "employer" contributions from your consulting business. As the "employer" (your consulting business), you can contribute up to 25% of your net self-employment income, up to a total annual limit across ALL 401(k) accounts of $69,000 for 2025. The calculation gets a bit tricky because you have to deduct half of your self-employment tax and your own contribution. You can absolutely contribute whenever you want during the year, and you actually have until you file your taxes (including extensions) to fund it for the previous year. Vanguard does offer Solo 401(k) plans, so giving them a call is a good place to start. You'll need your EIN from the IRS before setting it up.

After struggling with exactly this situation last year, I found this amazing tool at https://taxr.ai that completely changed my approach to my side hustle retirement planning. I was trying to figure out the maximum I could contribute from my 1099 work (about $70k annually) while also having a full-time job with a maxed-out 401(k). The calculators online were confusing because they didn't properly account for already maxing out employee contributions elsewhere. I uploaded my tax documents to taxr.ai and it analyzed my specific situation and showed me exactly how much I could contribute as the "employer" portion from my consulting income. It even helped me understand the calculations for the 25% profit limit correctly!

I was really skeptical when I saw that comment about taxr.ai, but I was struggling with this exact problem - figuring out retirement contributions with both W-2 and 1099 income. I decided to try it, and wow - it actually delivered. The analysis broke down exactly how much I could contribute as an "employer" from my consulting income (turns out it was about $18,500 on my $75k consulting income). What really helped was seeing how the deductions interact - you have to account for the SE tax deduction before calculating the 25% limit, which I was doing wrong. The tool even produced a document explaining the exact calculations that I could give to my accountant. Saved me from leaving money on the table with retirement savings, which apparently a lot of people with side gigs do.

If you're struggling to get specific answers about retirement accounts for your 1099 income, I'd suggest calling the IRS directly. I was in the same situation (W-2 job + consulting) and had questions that even my accountant wasn't 100% sure about. BUT... calling the IRS is basically impossible these days. I spent hours on hold over multiple days and kept getting disconnected. Then I found this service called https://claimyr.com that somehow gets you through the IRS phone queue. I was skeptical, but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c I used it and got connected to an IRS agent in about 15 minutes who confirmed exactly how the contribution limits work when you have both W-2 and self-employed income. Totally worth it just to have the official word rather than guessing.

I can't believe I'm saying this, but I tried the Claimyr service and it actually worked. I was 100% convinced it was a scam, especially since I've tried calling the IRS about 10 times this year with no success. I needed clarity on how my 401k contributions from my day job affect what I can contribute from my 1099 income. The service connected me to an IRS tax specialist in about 20 minutes, and I got a definitive answer about my contribution limits. The agent was able to confirm that I could still make "employer" contributions up to 25% of my net self-employment income even though I'd maxed out the employee portion at my W-2 job. They also clarified the deadline (tax filing date including extensions) and record-keeping requirements. Saved me hours of hold time and probably a few hundred in accountant fees for what turned out to be a 10-minute conversation.

I'm actually a freelance developer who went through exactly this process last year. One thing I didn't see mentioned yet - don't forget you also have the option of a Traditional or Roth IRA on top of your Solo 401k contributions (subject to income limits for direct Roth contributions). In my experience, the paperwork for setting up a Solo 401k was a bit of a pain, but Vanguard walked me through it. You will need an EIN from the IRS website (free and takes like 5 minutes online). The big advantage is that you can contribute WAY more than with just a SEP IRA when you're somewhere in that $50k-$100k self-employment income range.

Quick heads up - something nobody mentioned yet is that if you go the Solo 401k route, once your account balance hits $250,000, you'll need to file Form 5500-SF annually. Not a huge deal but something to be aware of for future planning.

One thing I'd add that might be helpful - if your consulting income varies significantly year to year (like yours does between $55k-$105k), you might want to consider making quarterly estimated tax payments that include your retirement contributions. This helps with cash flow management and ensures you're not scrambling at year-end. Also, since you're already with Vanguard, their Solo 401(k) has really low fees and good investment options. When you call them, ask about their "Individual 401(k)" - that's what they call their Solo 401(k) product. They'll walk you through the whole process and can even help you figure out the optimal contribution strategy based on your projected income. One last tip: keep detailed records of all your business expenses from the consulting work. The more legitimate business expenses you can deduct, the higher your net profit will be, which means you can potentially contribute more to the retirement account (since it's based on that 25% of net self-employment income calculation).