2005 max contribution for sole prop

[Santo Gold]

I was hoping someone could help me with a calculation for maximizing a a contribution for a sole prop in 2005. I have a 1 life (owner) sole prop 401k plan. Owner is under age 50, so maximimum accumulation is $42,000 for 2005. Accountant says that before any 401k or employer contributions, wages are $148,000.

To determine maximum, do I subtract the 401k portion from this figure ($148,000 minus $14,000 = $134,000) and then from there, perform the loop calculation on the $134,000 to see if she can get to $28,000? Or is the $148,000 first lowered further based on FICA because of the $14,000 401k contribution?

Thanks for any help.

[saabraa]

I was hoping someone could help me with a calculation for maximizing a a contribution for a sole prop in 2005. I have a 1 life (owner) sole prop 401k plan. Owner is under age 50, so maximimum accumulation is $42,000 for 2005. Accountant says that before any 401k or employer contributions, wages are $148,000.

To determine maximum, do I subtract the 401k portion from this figure ($148,000 minus $14,000 = $134,000) and then from there, perform the loop calculation on the $134,000 to see if she can get to $28,000? Or is the $148,000 first lowered further based on FICA because of the $14,000 401k contribution?

Thanks for any help.

[saabraa]

Presuming the $148,000 is net income from self employment and is not w-2 income---

($148,000 less 1/2 self employment tax) times 20% = the maximum 'employer' contribution.

If, for example, 1/2 of self employment tax is $7726, then you wind up at a little over $28,000 as the maximum employer contribution. This must be reduced to exactly $28,000 if $14,000 has already been contributed under the 401k feature.

Do not reduce the $148,000 by the amount of elective deferrals.