rocknrolls2 Posted February 9, 2019 Share Posted February 9, 2019 I am representing a client who is being offered a job with a new company, except that the company does not offer a 401(k) plan. She is likely to accept the offer but thinking of funding a traditional IRA as an option to replace the 401(k) her new employer will not provide. She also has a side business which she hopes to continue to maintain and is considering a solo(k) to help her fund her retirement through that business. Would the maintenance of the solo(k) result in her being treated as an active participant in a retirement plan for IRA deduction purposes? I did some preliminary research on this and nothing I have seen specifically addresses this. Since active participation is reported on the W-2 issued to an employee, I would tend to think that the answer should be No but wanted another set of eyes to back me up. Thank you. Link to comment Share on other sites More sharing options...
spiritrider Posted February 10, 2019 Share Posted February 10, 2019 The reason you have not seen anything specifically addressing this is because a one-participant 401k is still first and foremost a 401k plan. There is nothing to address. Contributions by or on behalf of a one-participant 401k participant make them an active participant for the tax year of those contributions. As do SEP IRA contributions for the calendar year of those contributions. Self-employment and the lack of W-2 reporting is irrelevant. rr_sphr 1 Link to comment Share on other sites More sharing options...
CuseFan Posted February 11, 2019 Share Posted February 11, 2019 Exactly. Partners in a partnership don't get a W-2, but if they are in partnership retirement plan they are not eligible for deductible IRA either (assuming over income thresholds). Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
Lou S. Posted February 11, 2019 Share Posted February 11, 2019 I will echo the two above me and add. If she takes a deduction for the 401(k) Plan on her tax return then she's covered by a pension plan and would use those rules for determining deductible IRA contributions. Previously Self-Employed individuals deducted "SEP, SIMPLE and Qualified Plan" Contributions on Page 1 of the 1040, for 2018 going forward I believe it is done on a Schedule 1, line 28, attachment to 1040. Link to comment Share on other sites More sharing options...
Luke Bailey Posted February 11, 2019 Share Posted February 11, 2019 She will be covered by a plan for the IRA deduction rules. The only income she can fund with is the side business income if she is an employee of the business that does not have a plan, because only that business could establish a plan for that income. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now