If you’re a small business offering a Gusto 401(k) powered by Guideline, you may qualify for valuable federal tax credits. These credits help you offset the cost of starting and running a retirement plan. We help you check your eligibility and generate the information your tax professional needs for IRS Form 8881.
401(k) tax credits are federal incentives for small businesses that start and contribute to retirement plans.
You may be able to get:
Up to $5,000 per year for plan administration and employee education costs
An additional $500 per year if your plan includes auto-enrollment. All Gusto 401(k) plans include auto-enrollment.
Up to $1,000 per eligible employee per year when you contribute to their accounts (including matching)
We recommend confirming your specific eligibility and timelines with your tax professional. Generally:
You can usually claim the basic startup credit for the first 3 years you offer a 401(k) or other qualified plan.
You can usually claim the employer contribution credit for the first 5 years you offer the benefit.
These credits are a dollar-for-dollar reduction of the taxes your business owes.
If your business does not owe taxes this year, you can often carry the credit forward to future tax years.
There are two types of eligibility to keep in mind:
Eligibility for the federal tax credit itself
Eligibility to use Gusto’s 401(k) tax credit information service
In general, you may qualify if your business:
Is new to retirement benefits:
You are in the first 5 years of offering the plan.
You have at least one participant who is not a highly paid employee.
Meets small business size guidelines: You had 100 or fewer employees who earned at least $5,000 in the year before you started the plan.
Always confirm your eligibility with your tax professional.
Gusto’s 401(k) tax credit eligibility information service is:
Exclusive to Gusto 401(k customers powered by Guideline (joint Gusto/Guideline customers)
Available for the current tax year only
If you use a 401(k) provider other than Gusto/Guideline, you can still claim these credits, but you’ll need to work directly with your provider and your tax professional.
We make it easier to gather the information your tax preparer needs for Form 8881. Here’s the three-step process.
Go to Taxes & compliance → Tax credits.
In the Retirement plan startup tax credit section, click Learn more.
Click Get started (or Claim your credit for free) and answer the eligibility questions.
We use your responses and your Gusto 401(k) data to determine whether you may qualify for the credit.
If you’re eligible, we:
Use your Gusto 401(k) plan data to generate the information needed for IRS Form 8881
Provide this information so you or your tax professional can complete and file the form with your business tax return
You can return to this information later by going to Taxes & compliance → Tax credits and viewing the Retirement plan startup tax credit tile.
Next, you:
Share the Form 8881 information from Gusto with your tax preparer, or
Use it to complete Form 8881 in your business tax software, if you file on your own
Your tax professional (or software) will:
Finish filling out Form 8881
File it along with your business tax return for the current tax year
Important: While we help you check eligibility and generate information for Form 8881, we do not prepare tax filings or provide tax advice. Your tax professional is responsible for completing and filing all tax forms.
Here are a few key points to keep in mind while filing.
Filing deadlines vary based on your entity type (S-corp, partnership, C-corp, etc.). For calendar-year businesses, extended tax return deadlines are often in September or October.
Always ask your tax professional to confirm your specific deadline.
You may still be able to claim the 401(k) tax credit by amending your tax return for that year, and including Form 8881 with the amended return
Work with your tax professional to do this.
Gusto’s 401(k) tax credit information service is only available for the current tax year. You may still be able to claim credits for prior years (for example, 2022 or 2023) by:
Working with your tax professional, and
Filing amended tax returns that include Form 8881 for those years if you complete your own business taxes
Most major tax software allows you to attach Form 8881. Check your software’s help center or support for instructions on:
Adding Form 8881
Entering the information generated in Gusto
If you notice an error in the information we generated:
Go to Taxes & compliance → Tax credits.
Under Retirement plan startup tax credit, click View filing form.
Click Edit and recalculate your credit to update your responses.
We’ll recalculate your eligibility and update the information for Form 8881.
If you don’t use a Gusto 401(k) powered by Guideline, you may still qualify for these federal tax credits.
However, you’ll need to work directly with your 401(k) provider to get plan details, and work with your tax professional to:
Determine eligibility
Complete and file Form 8881 and any amended returns
Gusto’s 401(k) tax credit eligibility service is available only to Gusto 401(k) (Guideline) customers.
Q: How much money can I actually save?
A: The exact amount varies by business, but many small businesses receive $5,500 or more per year from:
The startup credit
The auto-enrollment credit
If you make employer contributions, you may also receive up to $1,000 per eligible employee per year, which can add thousands more in credits
Q: When do I “get” the money?
A: The 401(k) tax credits are a dollar-for-dollar reduction in your business tax liability.
If you owe taxes this year, the credit reduces the amount you pay.
If you don’t owe taxes this year, you may be able to carry the credit forward to future years when you do owe taxes.
Your tax professional can confirm how this applies in your situation.
Q: What if I already filed my business return and then learn I’m eligible?
A: You may still be able to get the credit by:
Filing an amended tax return for that year, and
Including Form 8881 with the amended return
Ask your tax professional to help you amend your return and claim the credit.
Q: What if I notice my eligibility answers are wrong?
A: You can edit your responses and recalculate the information in Gusto:
Go to Taxes & compliance → Tax credits.
Under Retirement plan startup tax credit, click View filing form.
Click Edit and recalculate your credit.
We’ll update the information used to complete Form 8881, but your tax professional is still responsible for the final filing.
Q: Does Gusto file Form 8881 or give tax advice?
A: No. We:
Help you check eligibility
Use your Gusto 401(k) data to generate the information needed for Form 8881
But we do not:
Prepare or file tax returns or forms, or
Provide tax, legal, or accounting advice
Always consult your tax professional for guidance on your specific situation and how these credits apply to your business