self employment income - sole prop.

[Guest PMiller]

Looking for guidance on the calc. of compensation for a sole prop. to allocate a discret. cont in an age-wtd. PSP. I have used Ideal Sal. feature for non age-wtd. plan, but I/S doesn't work with age-wtd. I have the client's tax forms Sch C & SE (before contrib.).

[Tom Poje]

hopefully you will say that the sched C is way above 200,000 and you can run that as compensation.

If you are lucky and have the old pentabs system, it was actually possible to run this as a first year target benefit plan, because the system calculated an ideal salary for targets. I don't know if it does the same for targets in Relius. The reason it worked as a first year target was because there was no theoretical reserve, so people basically received 'an age weighted' contribution. you simply had to guess at a target benefit % until you came up with the dollar amount of contribution you desired. I ought to know, I came up with the screwball method of doing it years ago. (You also had the ability to build a table to match the age weighted factors) Sorry, I haven't tried such an experiment on Relius and haven't the time

[Tom Poje]

you could try the following spreadsheet.

you will have to enter rank and files age, comp and points.

That is a constant.

then enter a 'guess' contribution to be split amongst them

once that is determined, you can easily calculate what percentage of pay the owner should get, and the spreadsheet will calculate his comp, contribution, FICA

this does not cap contribution at 40,000.

and about all you can do is try different contribution amounts to the rank and file, which will result in different % to the owner.

Can't say I tested it, but logically it should work.

[Guest PMiller]

I do have Pentabs and I will give it a try. Thanks to you and Dave for the replys. May have some further questions as I proceed.

[Tom Poje]

send me your fax #. believe it or not, i still have a 1 page instruction sheet on what to do!