401k question: Mixed 1099 and W2 income

I work as a 1099 contractor part time, and as a W2 employee full time (40 hrs a week). My W2 employer offers a 401k plan, which I do not participate in yet, in 2008. I also have a solo 401k set up from last
year. I expect my 1099 income to be about the same as my W2 income this year.
I would like to defer the maximum amount possible.
My question is, will it be advantageous for me to not participate in my employer's 401k and instead only defer my 1099 income into my solo 401k because I could theoretically defer upto $43000 whereas I can only defer $15500 max if I participate in the employer's 401k (the employer does not match any contribution at all).
I have heard that because I am eligible to participate in my employer's 401k plan, I may not even be eligible to contribute to my solo 401k. Is this true?
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All 401(k) plans, both "regular" ones that "regular" employers offer and solo-401(k) plans for sole proprietors accept two kinds of contributions.
One kind of contribution is "salary deferral" -- this comes from the employee (or the sole prop wearing his employee hat) and for 2007 is limited to $15,500 (not counting the older worker "catch up" provision) across ALL 401(k) plans. In other words, all your salary deferral contributions COMBINED cannot exceed $15,500.
So if you contribute the full $15,500 to your "regular" employer's plan, you cannot make any salary deferral contribution to your solo-401(k).
However, the other kind of contribution is "profit sharing" coming from the employer. For "regular" employers, this usually comes in the form of the company match. For sole props, this can be as high as 20% of net self-employment income (which is your Sched C net minus half your SE tax). Each employer can make its own profit sharing contribution to its plan. Being in your "regular" employer's plan (and even receiving a match from them) does not prevent your sole prop from making a profit sharing contribution to your solo-401(k).
If your "regular" employer does not match, then it's a wash as to where you put the $15,500 salary deferral contribution. Though I'd go with putting it in the solo-401(k) because those are generally fully self-directed -- you're not stuck with a limited set of investments.
However, be aware of state tax laws. For example, for some bizarre reason, here in Massachusetts, none of a sole prop's contribution to his solo-401(k) (neither the salary deferral part nor the profit sharing part) are deductible for state tax purposes. But the salary deferral contribution of a "real" employee is deductible. Go figure.
-- Rich Carreiro snipped-for-privacy@rlcarr.com
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John Bliss wrote:

No. Your (employee) elective deferrals to all of your 401K plans can not exceed the maximum allowed. If you make elective contributions with your W-2 employer, there is a dollar for dollar reduction in the amount you can contribute to your Solo 401k as an employee. This does not prevent you as your own employer from making employer based contributions to your Solo 401K.
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