SEP ira contribution with partner no income
1. Client has partnership 50/50 and no employees
2. partners received K-1 for each with one as ZERO income and the other the full income per their partnership contract for the 1st year.
3.. The One partner with the income contributed to his SEP IRA what he was allowed per the rules
4. The other partner with ZERO income contributed nothing to his SEP due to no income.
Questions:
a. Is the above okay to do?
b. or does the partner with ZERO income still have to contribute to his SEP since his partner did?
Thank you.
Douglas
Permalink Submitted by William Tuttle on Tue, 2021-04-20 21:26
SEP IRA employer contributions normally have to be the exact same contribution rate as a percentage of compensation. No compensation, no contribution.
Why the SEP IRA and not a one-participant 401k?
Permalink Submitted by Douglas Bauerband on Tue, 2021-04-20 21:32
a. so the one partner was okay to fund his SEP, because he had the income on the k-1, correct?b. They could not do a solo 401k due to the contract they had with the partnership was 50/50 with income going 100% to the one partner the 1st year and then they will split from 2nd year and forward on a 50/50 basis with income. They both contributed to the SEP for 2020.Thank you.Douglas