Dare Johnson

See 1.401-10(b)(2) below. You will only use company X's net self employment income unless companies Y & Z have adopted the plan. § 1.401-10 Definitions relating to plans covering self-employed individuals. (b) Treatment of a self-employed individual as an employee. (1) For purposes of section 401, a self-employed individual who receives earned income from an employer during a taxable year of such employer beginning after December 31, 1962, shall be considered an employee of such employer for such taxable year. Moreover, such an individual will be considered an employee for a taxable year if he would otherwise be treated as an employee but for the fact that the employer did not have net profits for that taxable year. Accordingly, the employer may cover such an individual under a qualified plan during years of the plan beginning with or within a taxable year of the employer beginning after December 31, 1962. (2) If a self-employed individual is engaged in more than one trade or business, each such trade or business shall be considered a separate employer for purposes of applying the provisions of sections 401 through 404 to such individual. Thus, if a qualified plan is established for one trade or business but not the others, the individual will be considered an employee only if he received earned income with respect to such trade or business and only the amount of such earned income derived from that trade or business shall be taken into account for purposes of the qualified plan.

I think income for retirement plan should be $100k less 1/2 SE tax.

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.