Dare Johnson

If the John LLC owns the partnership interest, the loss on outside K-1 reduces SE earnings for retirement plan purposes. A good way to think about this - if John LLC was a partnership with $150k of net income (before the K-1) and the outside K-1 reduces income by $50k, there would only be $100k left to report to partners as income. You situation is not that unusual - it is just the income is reported on 2 different forms on the Form 1040.

Since the 2nd doctor is an employee and not an owner in the medical practice, he could setup a cash balance for his medical consulting.

There should be a section in the plan document addressing mistake of fact contributions. Generally the contribution must be returned with 1 year.

The employer can treat the premiums it failed to deduct as an employee benefit expense and start deducting now. The W-2s are correct because the premiums were not deducted. State law would determine if the missed deductions can be recouped. There could be some Section 125 plan issues with making the catch-up deductions pre-tax.

Retirement plan compensation has to be for personal services performed. If the S-corp's revenues are coming from the sale of assets, Mary has not provided any personal services to generate the income. Assisting with keeping clients is to protect the investment. Another issue - in the S-Corp tax return, the sale will likely show up as a capital gain while the salary and retirement plan expense will be ordinary expenses. A large ordinary business loss every year with an equally large capital gain could raise a ref flag with the IRS, especially if the plan was audited.

The company has likely already applied for and received loan forgiveness, so Section 1106(i) of the CARES Act provides that forgiven loans are excluded from gross income for purposes of the IRC.

The PPP loan forgiveness gives the partner tax basis to take distributions and is considered non-taxable income on the tax return so it will not affect SE income.