sole proprietor - 1099 income

[Alex Daisy]

A one person Sole Proprietor 401(k) P/S Plan. The owner is in the consulting business and gets paid commissions that are reported on a 1099 misc form.

Is this eligible compensation? The Plan definition of compensation is 415 comp.

If so, is it further reduced for the 1/2 FICA deduction?

[Bird]

Yes, it is eligible comp, and yes, it is reduced for 1/2 of FICA.

...assuming that's how it is reported, as my rule of thumb is that if someone is paying self-employment taxes on the income, it is earned income (as opposed to passive which would not be eligible as retirement plan comp).

Generally, if it's going on a Schedule C, and that's where commissions would normally go, the bottom line is self-employment income.

[jpod]

Is it reported as non-employee compensation on the 1099-Misc? If not I am pretty sure it can't qualify.

[Alex Daisy]

I am checking how it is being reported on the 1099 Misc.

[Alex Daisy]

It was reported as Non Employment compensation on the 1099 Misc. and the owner will be paying FICA taxes.

Why wouldn't this qualify as eligible comp?

[jpod]

it would. if it was reported as something else (like, "Other"), it may not