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Discussion:S-Corporation: Keogh Plan & Per Diem

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Discussion Forum Index --> Tax Questions --> S-Corporation: Keogh Plan & Per Diem


WITaxGuy (talk|edits) said:

1 April 2014
Howdy all:

First, my apologies for this simple question. I searched the yellow box and couldn't locate a satisfactory answer. Here is the situation:

Got a client (S-Corp), husband and wife both 50/50. Wife is on the payroll and receives wages and contributes to a 401K in this company. Obviously, the box 1 wages exclude the 401K contributions while this contribution is subject to FICA and medicare (Box 3, 5 etc). Further, the shareholder contributed the maximum 401K contributions of $17500. In addition, the S-Corp is enrolled in a Keogh Profit Sharing Plan where it contributed around $10K for the wife what is on the payroll. My questions are the following:

1) Is the 401K contributions (per W2) in par with S-Corp guidelines? Is this allowable?

2) Is the Keogh Profit Sharing Plan, which contributed 10K to the wife who is on the payroll, set the proper way - if so, does that mean that the company deducts this 10K as business expense?

3) Old Preparer told my client that consultants can take a per diem cost for each day. Wouldn't there have to be some kind of receipts/invoices provided in order to receive the per diem cost? Client wants to take the per diem as a deduction with out incurring any travel or meal expense etc?

Sorry if this seems like elementary question. I am just second guessing my self on everything I read. Thank you all for your efforts.

Ckenefick (talk|edits) said:

2 April 2014
I'm not sure about #2.

Doug M (talk|edits) said:

2 April 2014
#1. Get a copy of the plan document for the corp. Usually, the newer plans are paired plans with a 401K and a profit sharing component. Now many employees receiving payroll? Is Husband taking a salary? Is there a plan administrator, besides the company owner?

#2. If it is a profit sharing component of the 401k plan, yes. What percentage is the $10K to box 5 of the wife's W-2?

#3. It sounds like you are wary, then so am I. No travel, no per diem.

WITaxGuy (talk|edits) said:

2 April 2014
@ Doug:

No other employees on payroll. Wife (50% shareholder) is on payroll and husband (50% shareholder) is not on payroll. The husband is not taking salary. I conveyed to him to put himself on the payroll immediately as he is actively involved in the administrative duties. In terms of plan administrator, there is a third party broker/bank/financial institute that maintains the account. Does that suffice to keep them in compliance?

  1. 2 The 10K is less then 25% of the gross income (I am assuming you would look at the wages subject to FICA and not from BOX 1.
  1. 3 I am exhausted from tax season. But every year is a humbling experience at how little I know about our complex tax code and the endless areas I need to improve on.

Thanks Doug.

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