SEP Contribution
Hello-
Wife owns S Corp (doesn’t receive W2). Husband receives $100K W2.
1. My understanding is he can setup a new SEP IRA now for 2020 and contribute $25K. Does that sound correct?
2. The wife wouldn’t need to setup a SEP and wouldn’t receive any contribution even though she is the owner. Does that sound correct?
3. We could setup a Solo 401k for 2021 now and then roll this new SEP IRA into the Solo 401k. Does that sound correct?
Thank you so much for your help!
Permalink Submitted by William Tuttle on Fri, 2021-03-05 01:14
Effective with the 2020 tax year, an employer has until their tax filing deadline (3/15/21 for an S-Corp) including extensions (9/15/21 for an S-Corp) to adopt and contribute to a one participant 401k for the 2020 tax year. If the plan is adopted after 12/31/2020 only employer contributions are allowed.
There now is no need to adopt a SEP IRA for 2020, adopt one-participant 401k for 2021 and rollover the SEP IRA to the one-participant 401k in such circumstances.
Why does your spouse (the S-Corp owner) not receive any W-2 wages. Does she not perform any services what so ever?