How to calculate aggregate profit sharing contribution for a sole prop

[Guest]

I'm not following how the calculation of profit sharing contributions work for a sole proprietorship with employees when an employer specifies that he or she wants a specific $ amount to be allocated. The doc provides a prorata formula. How do you derive the earned income for the employer if depends on how much is allocated to the employees? Can you give an example?

Thanks

[Guest Mr. X]

The calculation involves trial and error or iteration if using a computer. It is as follows:

1)Line 31 of Schedule C to Form 1040 - 200,000

2)Contributions allocated to others - 40,000

3)Net - 160,000

4)*.9235 - 147,760

5)1/2 social security tax

(.062 * minimum of (twb or #4)

I used the 1999 twb of 72,600 - 4,501

6)1/2 medicare tax (.0145 * #4) - 2,143

7)Contribution allocted to sole prop. - 30,000

8)Net Earned Income (#3-#5-#6-#7) - 123,356

[Dave Baker]

Gary Lesser has some software that might fill the bill -- he's been selling and refining it for quite a few years. I understand the calculations are particularly ugly if more than one partner is involved.

http://www.benefitslink.com/GSL/QPSEP_profile.html

[Guest]

The example provided includes $40,000 allocated to employees. How do you derive the $40,000 if total income includes the earned income of the employer?

Thanks

[Guest Mr. X]

In the example given the $40,000 represents the contribution allocated to the employees other than the sole proprietor. Therefore, his level of earned income is not a factor in determing that number.