Retirement plan with income from a Schedule k-1
What kind of retirement plan can I start if I get income from a Schedule K-1? I have already maxed out my Roth IRA.
What kind of retirement plan can I start if I get income from a Schedule K-1? I have already maxed out my Roth IRA.
Permalink Submitted by mk foss on Sat, 2010-01-23 02:58
What kind of business is generating the Schedule K-1? If it’s an S corporation, you cannot do a retirement plan using the Schedule K-1 earnings You need a Form W2 from the S corporation to support a deduction and then the deduction would be claimed on the S corporation return and netted against S corporation profits.
If the K-1 is from a partnership and you owe SE tax on the partnership earnings, you are eligible to create a retirement plan but the plan must be comparable to plans established by the other partners. For instance if it is a law partnership and one partner uses SEP IRAs and another creates a defined benefit plan, the two plans are unlikely to be comparable.
If the K-1 is from a trust or from a partnership without SE earnings, you’re not eligible to start a retirement plan.
Permalink Submitted by Linda Randazzo on Sat, 2010-01-23 14:53
Just curious,
Would the partnership that is not eligible be a limited liability partnership?
Permalink Submitted by Richard Partin on Sat, 2010-01-23 21:54
I get my Schedule K-1 from a real estate limited partership. I don’t know what SE earnings are?
Permalink Submitted by mk foss on Mon, 2010-01-25 00:23
A real estate limited partnership generates passive income – that income isn’t eligible for a retirement plan.
SE earnings are earnings from self-employment. They come from a partnership where someone is actively involved in a trade or business – a medical or legal partnership for example. Limited partners don’t have SE earnings in most cases. They would have to be actively involved in performing services and have an amount on Schedule K-1 supporting that.