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Please stop.

None of the prior responses deal with your issue. So, here is the info you need. Net self employment income (which is used for purposes of calculating compensation for plan purposes) is reduced by contributions to the plan BY THE EMPLOYER that are non-taxable to the self employed individual. So, for example, 401(k) deferrals do not reduce the compensation for plan purposes, but the profit sharing employer contributions (including safe harbor 401(k) contributions, if applicable) DO reduce the compensation for plan purposes. It is confusing because both the 401(k) deductible deferral and the company contribution show up on the individual's 1040 on the same line, but it is the Schedule SE (with some minor modifications that we don't need to go into here) that will basically give you the compensation for plan purposes. And neither deductible nor Roth 401(k) deferrals reduce your net income on Schedule SE. Your two individuals should have the same income for plan purposes. Now, the fact that this question is even being asked makes me think that there is not a competent retirement firm involved in the issue. You title this "profit sharing Roth" but there is no "profit sharing roth". It is 401(k) Roth; profit sharing is completely different. When dealing with self-employed individuals, the determination of net self employment income for plan purposes is potentially a very complex issue. It includes issues of Section 179 deductions claimed (which could be different for the two partners) and even some oil and gas depletion deductions claimed (which, while I have included those in my outlines on this subject, I have never had a client who had any) and even unreimbursed partnership expenses which again can be different for each partner (like, possibly, different amounts of continuing medical education expenses for two doctor partners). This is not a calculation to be done by the "cpa"; it is to be done by competent pension people who completely understand what is a complex tax calculation in many instances.

Not sure if this will help, but the IRS has a 20-page memo on the topic of taxation of employee claims: https://www.irs.gov/pub/lanoa/pmta2009-035.pdf Might not do any good in this case, but we've used it before proactively to nudge the plaintiff's attorney in the right direction. Generally I've seen the plaintiff's attorney wants everything on a 1099 regardless of the claim.

Unfortunately that settlement agreement is not binding on the IRS.

I can't think of any reason why any portion would be a 1099-MISC item, but putting that aside anything that belongs on a W-2 would be a Box 1 item (plus boxes 3 and 5).

I would like to add a couple of things that I don't think have been covered. First, as far as I know, the IRS's position is that the CBA is not part of the plan doc, and therefore you have a qualification (not a labor law) problem if you follow the CBA and it is inconsistent with the plan doc. I can't off-hand recall a regulation or ruling (there may be a court case) that specifically says that, but I believe it is the IRS's position and that would be the most straight-forward reading of 1.401(a)-1 written plan document requirement. Second, in my experience, the provisions of CBAs dealing with retirement benefits, if they deal with a single employer plan, are almost always written too broadly to actually be administered without being embodied in plan language that adds details, like what "pay" means, what the applicable entry date is, etc.

I've seen people "try" this - but, you then have labor provisions cluttering up a plan document, and plan provisions cluttering up the labor provisions. As a lawyer - I would never recommend that, as it is a recipe for disaster. What happens when you need to make a regulatory amendment to the plan that doesn't affect the labor contract? If the two are one, you need union approval. What if you have non-union people in the plan? What about a regulatory audit of the plan - which now would implicate the CBA "as a plan document" and maybe inconsistent, non-compliant, or otherwise troublesome. What if you change the CBA i a way that inadvertently affects the plan or it's operation? And then, why would you want the NLRB looking over your plan provisions? You already have the IRS and EBSA doing so.... Why would you want the IRS and EBSA looking over your CBA provisions? Generally a bad idea (IMHO)....

I disagree completely. The CBA and the NLRA is enforceable against the employer - NOT against the plan. The employer has an issue - and SHOULD HAVE amended the plan to account for the provisions of the CBA, but the CBA does not work to amend the plan, and the NLRA can only penalize the employer for failing to abide by the terms of the CBA. Like I said originally, it is fixable.... But it must be fixed - the CBA doesn't "fix it" automatically. And no, I wouldn't go to the union and say we can't make the contribution. I would go to the union and say the plan inadvertently wasn't amended, we are doing so, seeking a VCP remedy to retroactively do so, and will make all CBA required contributions with earnings adjustments. And frankly, I have done so before.... As for as a good attorney finding a way to do so without a VCP, I doubt it. The fix requires an RETROACTIVE amendment - and there is but one way to do that - and that's through a VCP filing - PERIOD.

Agree with those who say plan doc governs for plan qualification purposes, but would point out that that does not affect the fact that if the plan doc gives less and you follow that (which in theory you must for IRS qualification), you have a breach of the CBA. If (as is likely) this goes back to a year before the current plan year, you need to go to VCP, which will likely be sympathetic. This is not one of the plan doc fixes that qualifies for self-correction under 2016-51.

Without disagreeing with Mojo or CuseFan, perhaps ERISAAPPLE suggests an employer might prefer to amend, if needed, the plan's document so both the employer meets its contract and labor-relations obligations and the plan's administrator can meet its responsibility to administer the plan according to the plan's governing document.

No retirement deductions are taken for partners on the 1065 or K-1's. Only by partners themselves on 1040. Also, it's all self-employment income, Roth and non-Roth, which is what the plan doc will use for non-W-2 participants.

I still think that

I'm not a CPA but I thought Partner traditional 401(k) contributions got deducted on their 1040 not the K-1.