IRA eligibility
I am re-posting – hoping to gain insight to the following question.
Thank you in advance
Sole proprietor has earned income (all earned income is derived from his sole proprietorship) but reports an annual net loss.
Is Sole Prop eligible to make an IRA contribution?
I’ve been receiving conflicting answers. I was told “yes” because he has earned income followed by “no” because total net income was a net loss.
Any guidance is appreciated.
Permalink Submitted by Alan - IRA critic on Fri, 2014-09-26 20:25
There is no earned income from the proprietorship for which to make an IRA contribution. However, if he operates as an S Corp with a net loss, he could still contribute because he individually would receive a W-2. Or proprietor could have an unrelated job and a W-2 from that job. He could use that W-2 to make an IRA contribution even though there was a net loss even larger from the proprietorship. Per p 8 of Pub 590, “Self employment Loss – If you have a net loss from self employment, do not subtract the loss from your salaries or wages when figuring your total compensation”. In other words, if he has a W-2 then he has earned income for IRA contribution purposes.