SEP plan for SMLLC
A client is looking at the possibility of his SMLLC becoming a shareholder in an S-corporation in addition to the consulting income that the SMLLC currently generates.
Question would the income pass-through from the S-corporation, which is expected to be substantial, qualify as income to calculate the SEP annual contribution limitation?
Permalink Submitted by David Mertz on Fri, 2016-02-19 20:11
No. Assuming the S-corp has a SEP IRA plan, the contribution would be made to your client’s SEP IRA account under that plan by the S-corp based on your client’s W-2 income from the S-corp.
Permalink Submitted by Alan - IRA critic on Fri, 2016-02-19 20:43
What if the S Corp has it’s own retirement plan, eg a SIMPLE IRA?
Permalink Submitted by David Mertz on Fri, 2016-02-19 20:52
I’ve clarified my answer to be for that of a SEP IRA plan of the S-corp. It’s possible that the S-corp could have some other type of plan, but the contributions under the S-corp’s plan would still be based on W-2 wages. Pass-through from the S-corp is not income from self-employment.