SIMPLE IRA for the self employed

[Guest BruceC]

If one is organized as a sole proprietor or is a General Partner of a partnership that offers a SIMPLE IRA, and the business has, say 10 eligible EE's who elect to defer a % of their salary within the 60 day period prior to the start of the plan year, and due to whatever circumstance, the proprietor/partnership does not generate net income for that plan year, does this mean that matching (or non-elective) contributions must be made to employees but cannot be made to the sole proprietor or partners because there is no net income for these individuals for that year?

BruceM

[J Simmons]

BruceM,

For the sole proprietorship situation, you are correct.

For the partnership situation, are any of the partners entitled to guaranteed payments? If a partner has a net after his share of losses are subtracted from the amount of his guaranteed payments, he has net income for the year.

[Guest BruceC]

John

Thanks for the response.

To clarify for the GP....

Lets say the partnership distributes $3,000/mo = $36,000 per year, and for that year, his share of the NOL is $20,000. Are you saying that he has $16,000 available to use in the calculation of his SIMPLE IRA contribution?

BruceM

[J Simmons]

If the $3,000/mo = $36,000 per year is a guaranteed payment rather than just some type of advance, yes, it is my understanding that he'd have $16,000 ($36,000 - $20,000) as net income from the partnership.

[Guest BruceC]

If the $3,000/mo = $36,000 per year is a guaranteed payment rather than just some type of advance, yes, it is my understanding that he'd have $16,000 ($36,000 - $20,000) as net income from the partnership.

Thank you

BruceM