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A client has received both schedule c income and W2 income, both of which came from his own businesses (sole proprietorship and s-corp). How can we run DB calculation in this case? Should I use earned income + W2 as the compensation basis? 

What about deductions? How can we break down the contribution among sole proprietorship and s-corp? 

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Did both entities adopt the plan?  If so, yes, you combine the two amounts, paying careful attention to ensure the earned income is calculated properly, just as  you would if the only source was the sole proprietorship.

There are no regulations on how to divide the deductions.  The accountant is technically responsible for the breakdown although as a practical matter it usually falls to the actuary to, at a minimum, suggest how it might be done.  The only guidance I am aware of is informal guidance from the IRS at conferences to "do something reasonable".

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4 minutes ago, Mike Preston said:

Did both entities adopt the plan?  If so, yes, you combine the two amounts, paying careful attention to ensure the earned income is calculated properly, just as  you would if the only source was the sole proprietorship.

There are no regulations on how to divide the deductions.  The accountant is technically responsible for the breakdown although as a practical matter it usually falls to the actuary to, at a minimum, suggest how it might be done.  The only guidance I am aware of is informal guidance from the IRS at conferences to "do something reasonable".

Thank you Mike! Yes, both entities have adopted the plan. But when it comes to the earned income, things become tricky. One approach is to only use the net schedule c amount to calculate earned income, contribution amount, and then combine with the the calculation result only using W2 income. Essentially this is treating both sources of income as two different entities, and then combine them together. I'm not sure if this is valid. How is earned income supposed to be calculated in a more appropriate way? 

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There are no specific rules I'm aware of.  Your way makes sense as long as each and combined is not bumping up against 415 or 401(a)(17). If so, it gets to be more complicated.

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