Sole member LLC with SEP-IRA and employee 401k plan for spouse S-Corp contribution limits

Submitted by Gregory Suplick on Tue, 2020-12-29 20:21

I have my own sole member LLC with a SEP-IRA (only me), but I am also an employee of my spouse’s S-corp that has a profit-sharing 401k plan. Can I maximize my annual SEP contributions as well as contribute to the S-Corp profit sharing 401k? FYI, I am NOT an owner, partner, etc. of my spouse’s S-corp, only an employee and both the LLC and S-Corp operate in completely different areas of service. I have attempted to look up the answer and it seems that I can, but we recently we informed by an ancillary service partner with our accounting firm that I cannot as the IRS sees both companies as the same since we are married. Any information/insight would be greatly appreciated.



Submitted by William Tuttle on Wed, 2020-12-30 06:24

  • Ownership interests are not the only way spouses can be considered in a controlled group by family attribution. Your employee status makes it a controlled group as would any minor children.
  • The qualified separate line of buiness rules only apply if both businesses have >=50 employees, you meet other complex requirements and request and receive such a determination from the IRS.
  • The ancillary service partner with your accounting firm is correct. The two businesses are a controlled group.

Submitted by David Mertz on Wed, 2020-12-30 13:36

Because these two businesses are a controlled group through spousal attribution, they must be treated as a single company with respect to a retirement plan.  Since a SEP plan has the same employer contribution limit as a the 401(k) plan, it would make sense that the plan covering both would be the 401(k) and the employer contribution with respect to your single-member LLC would be made to the 401(k) and must generally be in the same proportion to compensation (since the employer contribution is a profit-sharing contribution rather than a matching contribution).  Additionally, by December 31 you could make election to make an employee deferral or Roth contribution for the year to the 401(k).

Add new comment

Log in or register to post comments