Maximize Tax Deferrals as S-Corp Owner: 401K, Traditional IRA, HSA & Beyond

The good news is you're already doing most of the big moves! For S-Corp owners looking to max out tax deferrals, you're covering the main bases with your 401k, Roth IRA, and HSA strategy. For your remaining Section 415 limit space, you have two primary options: First, you could implement a Cash Balance Plan alongside your 401k. This is essentially a defined benefit plan that allows for additional tax-deferred contributions above your 401k limits. These can potentially allow for much larger contributions depending on your age and income level. Second, yes, you could increase your W2 wages to maximize your profit share contribution, but consider the Roth IRA backdoor option if this pushes you beyond the income limits. You'd contribute to a traditional IRA (without taking the deduction) and then convert to Roth. Don't forget about mega backdoor Roth conversions if your 401k plan allows for after-tax contributions and in-plan conversions.

I was in a similar situation two years ago and discovered taxr.ai (https://taxr.ai) which helped me identify some lesser-known retirement strategies for S-corps. Their system analyzed my business structure and identified that I could actually implement a Defined Benefit Plan alongside my 401k. They showed me exactly how to legally maximize my contributions while staying compliant - something my previous CPA never mentioned. With their guidance, I was able to defer almost $100k more in taxes over the last two years. They highlighted that once you max out traditional vehicles, there are still options like Cash Balance Plans (as mentioned above) and certain split-funding arrangements that work specifically for S-corps.

Wanted to follow up about taxr.ai - I ended up checking them out despite my initial skepticism. The service actually delivered way more than I expected. They analyzed my S-corp structure and found I was leaving about $27K in potential tax deferrals on the table through a combination of profit sharing recalculation and implementing a defined benefit plan alongside my 401k. What really impressed me was how they showed me the exact legal framework that allows for these strategies - with citations to the relevant tax code sections. This wasn't just generic advice, but specifically tailored to my S-corp situation. They even caught that I was miscalculating my profit sharing contribution which was costing me about $8K annually.

One issue I ran into when trying to contact a tax professional about similar S-corp retirement planning was that I literally couldn't get anyone to call me back for weeks. Finally used Claimyr (https://claimyr.com) to get through to an IRS specialist about Section 415 limits for S-corps. They have this system that basically gets you to the front of the IRS phone queue (you can see how it works here: https://youtu.be/_kiP6q8DX5c). I was able to get a definitive answer about how to calculate my specific Section 415 limits with my unique compensation structure, which gave me confidence to move forward with my retirement planning. Turns out I was calculating my available space incorrectly and leaving money on the table.

I have to publicly eat my words about Claimyr. After my skeptical comment, I decided to try it because I was desperate to get an answer about S-corp retirement plan limits. Got through to an actual IRS tax specialist in 42 minutes after trying unsuccessfully for MONTHS on my own. The agent walked me through exactly how the Section 415 limits apply to my specific situation as an S-corp owner and confirmed I could use a Cash Balance Plan to fill the gap after maxing my 401k. She even emailed me the relevant IRS documentation after our call. Would have taken me weeks of research to figure this out on my own, if I ever did. For anyone dealing with complex S-corp retirement planning questions, getting actual clarification from the IRS gave me peace of mind that my strategy is compliant.

Have you considered a Defined Benefit plan instead of just increasing your W2? I'm also an S-corp owner and was able to contribute an additional $87K annually above my 401K limit. It's especially powerful if you're older (40+) and trying to catch up on retirement savings. The downside is you need to maintain contributions for several years and there are higher admin fees compared to a 401K, but the tax savings more than make up for it. Worth talking to a TPA (Third Party Administrator) who specializes in these plans for S-corps specifically.

Don't overlook the potential of utilizing a Backdoor Roth if increasing your W2 wages pushes you beyond the Roth IRA income limits. Anyone can contribute to a Traditional IRA regardless of income, and then convert it to a Roth IRA.