An example
For a 53-year-old CPA with a solo tax and advisory practice, the 2026 figures work out like this:
- Cash balance plan, first year
- $235,000
- Solo 401(k) alongside
- $38,000
- Both plans
- $272,000
- A Solo 401(k) on its own
- $80,000
- Federal income tax saved
- $39,700
Federal income tax only, compared with making no retirement contributions. State tax saved depends on where you live: see savings by state. An illustration from the same calculation as the estimate, not a quote.
Accountants are generally a specified service business for the 20% qualified business income deduction. Above the income threshold that deduction phases out, and a contribution that brings taxable income back down can restore part of it. How the deduction interacts with contributions
For your own practice
The obstacle for most small practices is seasonal help. A preparer or assistant hired for tax season is an employee. A plan can require a year of service with 1,000 hours before someone joins, which keeps a short-season worker out for a time, but their hours have to be tracked every year, and a 401(k) kept alongside may have to let long-term part-time workers make deferrals. A practice with seasonal staff is not the one-person business these plans are built for. See hiring your first employee.
Partners in a firm with staff are in the same position: the firm is the employer and its employees count.
Accounting is a specified service, and the regulations include enrolled agents, return preparers and auditors as well as accountants.
What to check when a client asks
Clients often raise a cash balance plan with their accountant first. These are the points that most often decide whether one works and what it is worth:
- Employees, counting related businesses. The controlled group and affiliated service group rules, including a spouse's businesses, are the most common reason a solo plan does not qualify. See who can have a solo cash balance plan.
- Plan compensation. For an S corporation owner, W-2 wages paid in the year. For a sole proprietor or partner, net earnings from self-employment less the deduction for half of self-employment tax.
- An existing Solo 401(k). Employer profit-sharing is generally held to 6% of pay in a year both plans are funded. See using a cash balance plan with a Solo 401(k).
- An existing SEP. The instructions to Form 5305-SEP say not to use it if the employer maintains another qualified plan. See cash balance plan vs. SEP IRA.
- Where the deduction goes. Sole proprietors and partners deduct their own contribution on Schedule 1 of Form 1040, not on Schedule C, so self-employment tax is unchanged.
- The QBI effect. Treas. Reg. 1.199A-3 treats the contribution as reducing qualified business income, so the deduction and the contribution have to be computed together.
- Steadiness. Whether the client's income can cover a minimum contribution every year, not just this one.
Timing in tax season
A client who raises this in the spring is often not too late. A new plan can be adopted for a year up to the due date of the business's return for that year, including extensions, and the minimum contribution is due 8½ months after the plan year ends. Two things cannot wait:
- S corporation and C corporation wages for the year are fixed on December 31.
- 401(k) deferral elections cannot be made after the compensation is earned, except that the sole owner of an unincorporated business with no employees may make first-year deferrals up to the unextended due date of the return.
The full calendar is in cash balance plan deadlines. In a plan set up through Maxed, Maxed prepares the documents and calculations, an independent enrolled actuary certifies the contribution range, and the client signs as sponsor and plan administrator. Your role stays the tax return.