SE Income

[Guest donl]

We have 1 person LLC 401(k) plan and earned income for the owner is $25k. She wants to make a 401k contribution, but she is a 12.5% partner in another partnership where her portion of the "earned income" is -$90,000, which will offset the $25k from the LLC that sponsors the 401(k) Plan. Does this loss preclude her from making a 401(k) deferral?

[Jim Chad]

I don't think so.

But why would she want to defer when she is in the zero tax bracket?

[Kevin C]

But why would she want to defer when she is in the zero tax bracket?

Why not Roth?

[Draper55]

no problem here that i see. maybe this is a joint return and

you have spousal income or investment income...could be reasons

to still want to make the deferral on a pretax basis..

[mbozek]

We have 1 person LLC 401(k) plan and earned income for the owner is $25k. She wants to make a 401k contribution, but she is a 12.5% partner in another partnership where her portion of the "earned income" is -$90,000, which will offset the $25k from the LLC that sponsors the 401(k) Plan. Does this loss preclude her from making a 401(k) deferral?

See pub 560 P 15 Self employed person can make contributions for himself only if he has has net earnings from compensation in the trade or business for which th eplan was set up.

Reg 1.401-10(b)(2) " If a self employed person is engaged in more than one trade or business, each trade or business shall be considered a separate employer for applying the provisions of sections 401 through 404 to such individual. "

Edit: If she is in the 0 tax bracket she could contribute up to 22k in employee contributions to a roth 401k account since her earned income would be eligible for contribution.