Self Employed Owner Schedule C from two businesses

[Guest jsample]

Same individual has 100% ownership a tool and die shop and in an auto garage.

The auto garage employees are excluded from the tool and die shop plan.

Schedule C from tool and die for the owner is $240,000

Schedule C from auto garage for the owner is a loss ($87,000)

What compensation should I use for ADP & ACP testing for the owner in the tool and die plan, $240,000 or combine the two schedule C's and use $153,000?

Thank you.

[ETA Consulting LLC]

Same individual has 100% ownership a tool and die shop and in an auto garage.

The auto garage employees are excluded from the tool and die shop plan.

Schedule C from tool and die for the owner is $240,000

Schedule C from auto garage for the owner is a loss ($87,000)

What compensation should I use for ADP & ACP testing for the owner in the tool and die plan, $240,000 or combine the two schedule C's and use $153,000?

Thank you.

It appears as if you have Compensation for Plan purposes of $240K since only 'earned income' from the tool and die shop would be used for plan purposes. Even if both companies were included in the plan, Compensation would still be $240K (Calculated at $240K plus Zero). Don't ask me why, but I was served up 'cold' by a room full of actuaries at the ASPPA Annual Conference last year for questioning why Compensation wouldn't net the negative against the positive

You should ensure the plan passes 410(b) by including the owner (i.e. 100% of HCEs) while excluding all employees from the auto garage.

Good Luck!