401(k) for sole proprietor?

[betheeg]

i have a client that is a sole proprietor. he has set up a 401(k)/ps plan for 2002-he is the only participant. he os over 50. can he contribute $12,000 in deferrals as well as make a 25% profit sharing contribution using his sch c info? if so, do you take deferrals out of sch c figure when calculating the 25% ps contrib? sch c info is approx $91,000 (line 31). we have mixed opinions in my office and cannot find any answers in our resources....

thanks for any help.

[Archimage]

I am assuming that he is the only employee. There is no possible way for him to get to $40,000. His maximum contribution would be $16,728.34 if my calculations are correct. He could then defer an additional $12,000.

[Guest rmeigs]

I agree with Archimage that his maximum PS contribution is going to be around $16,800. In 2002, then could have also made a salary deferral of $11,000 plus a $1,000 catch-up.