Discussion:SEP IRA & Solo 401k
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| Revision as of 03:21, 29 November 2008 CarlLaFong (Talk | contribs) (There is nothing) ← Previous diff |
Revision as of 16:30, 29 November 2008 Lmcdon9822 (Talk | contribs) (From what I unde) Next diff → |
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| {{ForumReplyPost|UserID=CarlLaFong|Date=29 November 2008|Text=There is nothing in the law to prevent the taxpayer from participating in a 401(k) plan and a SEP plan in the same year.}} | {{ForumReplyPost|UserID=CarlLaFong|Date=29 November 2008|Text=There is nothing in the law to prevent the taxpayer from participating in a 401(k) plan and a SEP plan in the same year.}} | ||
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| + | {{ForumReplyPost|UserID=Lmcdon9822|Date=29 November 2008|Text=From what I understand, we are talking about a small business client. He can either contribute to a solo 401(k) or SEP-IRA, not both. He is a single memeber LLC, to the solo 401 (k) will be better for him since he can contribute more. | ||
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| + | As Carla is saying, if the client had a W-2 job AND the single member LLC, he would be able to contribute to his employer's 401(k) and contribute to his solo 401(k) OR SEP-IRA. The funds going into the solo 401(k) or SEP-IRA can only be from his business.}} | ||
Revision as of 16:30, 29 November 2008
Discussion Forum Index --> Advanced Tax Questions --> SEP IRA & Solo 401k
Discussion Forum Index --> Tax Questions --> SEP IRA & Solo 401k
| 20 October 2008 | |
| I have a client who is 100% owner of a single member LLC - files as a disregarded entity for federal tax purposes. He maxes his SEP IRA. Can he also participate in a Solo 401K plan? | |
| 20 October 2008 | |
| I believe he can sponsor a Solo 401k and the SEP at the same time but the SEP cannot be based on the IRS model (i.e. adopted by filing Form 5305-SEP) and appropriate language must be included limiting the Sec. 415 contributions. | |
| 20 October 2008 | |
| What model must the SEP be based on? Currently it is based on the IRS model. I wanted to know what steps I should take so I have both going on to maximise his deferral | |
| 20 October 2008 | |
| It would have to be a prototype plan (usually designed by banks, brokerages etc.) or an individually designed plan. However, I don't see how he would maximize his deferral by having both SEP and 401(k). | |
| 21 October 2008 | |
| Why contribute to both plans? Why not just contribute to the 401(k) plan? The SEP-IRA limitation is 25% and the profits sharing contribution in the 401(k) plan is also 25%. | |
| 29 November 2008 | |
| You can either take Solo 401 (k) or SEP-IRA but not both in the same taxable year.
Solo 401 (k) gives the higher deductions because of the employee deferral. This is in addition of 25% of the earned compensation ( limited to $46,000.00) | |
CarlLaFong (talk|edits) said: | 29 November 2008 |
| There is nothing in the law to prevent the taxpayer from participating in a 401(k) plan and a SEP plan in the same year. | |
Lmcdon9822 (talk|edits) said: | 29 November 2008 |
| From what I understand, we are talking about a small business client. He can either contribute to a solo 401(k) or SEP-IRA, not both. He is a single memeber LLC, to the solo 401 (k) will be better for him since he can contribute more.
As Carla is saying, if the client had a W-2 job AND the single member LLC, he would be able to contribute to his employer's 401(k) and contribute to his solo 401(k) OR SEP-IRA. The funds going into the solo 401(k) or SEP-IRA can only be from his business. | |
