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Simple, SEP plans and second biz revenue?


Guest Amanda F
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Guest Amanda F

I am a principal in an inc. biz that does not have any retirement plan in place. Therefore, I contribute to an IRA.

As a second biz in which I alone am employed (from a home office), I earn approx. 20K per year. Is it possible for me to set up a Simple or SEP IRA for this revenue? Which option applies if I am the sole owner and sole ee? Can I simultaneously continue to contribute to my IRA and claim the 2K fed. tax benefit? I have tried to read the regs, speak to investment firms and accountant but have gotten conflicting information. Thank you for any help.

I own 20% stock in my primary biz's inc.

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See the brother-sister controlled group rules under Code Section 1563(a)(2) available on B/L. If you own (directly or indirectly) 50 percent or less, then the sole-proprietorship may maintain a qualifed retirment plan, SEP, or SIMPLE-IRA without covering employees of the other business (based only on the $20,000). If you do, your deduction for an IRA contribution may be phased-out or eliminated, which happens when an individual and/or his or her spouse is an "active participant" and modified AGI exceeds certain levels.

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  • 1 month later...

Probably, assuming no indirect ownership and the businesses aren't part of an affiliated service group (e.g., situations were services are provided to the other entity). If so, have your CPA look at IRC Section 414(m). Agin, your IRA contributions may not be deductible in their entirety (see above answers).

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