Netting multiple sources of earned income?
Client operates a profitable business as a sole proprietor and establishes a SEP for that business and it’s employees. He wants to use his self employment income as the basis for his personal share of the SEP contribution.
Problem is he also has another unrelated business with no employees that produces losses.
The question is whether he has to net the income/loss from both businesses in determining his earned income for SEP purposes?
Thanks
Permalink Submitted by Peter Lingane on Sat, 2011-08-06 18:30
A self-employment loss in one business does not reduce SE compensation in a separate business for income tax or pension contribution purposes nor does a SE loss reduce compensation for IRA contribution purposes. It is not always clear that two businesses controlled by the same individual are separate businesses.