Single-Member LLC SEP Contribution
Client formed a single-member LLC in 2020 (disregarded entity). They want to take the maximum SEP deduction ($58K in 2021) and will have ample net income (greater than $300K).
My question – Since they are a single-member LLC, they do not pay themselves a guaranteed payment and will calculate the SEP contribution based on the net income from the Schedule C (for the SMLLC). Is that correct?
Permalink Submitted by William Tuttle on Tue, 2021-02-16 22:33
The client is not treated any different than any other sole proprietor. Their maximum employer contribution is 20% of their net earnings from self-employment (self-employed earned income) = business profit – 1/2 SE tax.