SIMPLE IRA and LLC

[Guest carolyny]

Please comment on these facts:

1.) Full time employee quits job at Corporation A (no ownership of Corp A and no retirement fund contribution for 2001 from A and no salary deferrals during time at A in 2001.)

2.) She sets up LLC and is the sole member and worker. Not an employee and doesn't receive W-2 wages or salary. No payroll is running. Takes draws from the LLC account.

3.) She sets up SIMPLE IRA prior to year end and gives self notice of rights under the SIMPLE.

4.) Total income received prior to 12/31/01 before deductions is $10,000. Business expenses for December will be about $3,000 to $3,500. (Net taxable income should be close to $6,500 before SIMPLE contribution.)

5.) She wants to fund $6,500 max to SIMPLE IRA.

Two questions:

A. Can the contribution be made prior to filing of federal tax return plus extensions? (no regular pay periods)

B. Can she also fund a matching 3%? If so, how do you calculate the amount? 3% of $6,500? 3% of zero (the net after the SIMPLE contribution?

Any insight would be appreciated

Thank you,

[Gary Lesser]

Based on net profits of $6,500, her NESE is $6002.27 ($6,500 x .9235).

$6002.27/1.03 = $5827.54

$5827.54 plus 3% of $5827.54 = $6002.27.