1099 from PC

[SSRRS]

Hi,

I hope all ae well and healthy. A doctor owns a PC, with no other employees. He received a 1099 from the PC for quite a few years. Can this 1099 income be used as compensation for his DB Plan? Thank you.

[C. B. Zeller]

Presumably he reports the 1099 income on Schedule C of his 1040, and he can use Schedule C income as plan compensation.

[Bill Presson]

The doctor considered himself an independent contractor to his own PC?

[SSRRS]

7 hours ago, C. B. Zeller said:

Presumably he reports the 1099 income on Schedule C of his 1040, and he can use Schedule C income as plan compensation.

Thank you. So it appears that he can not use the full 1099 amount, rather the net schedule C income. Correct?

[SSRRS]

6 hours ago, Bill Presson said:

The doctor considered himself an independent contractor to his own PC?

That is part of what was throwing me off.

[Bill Presson]

11 minutes ago, SSRRS said:

Thank you. So it appears that he can not use the full 1099 amount, rather the net schedule C income. Correct?

How does he get paid from the PC? Also if he has a PC AND a sole proprietorship, they both likely have to adopt the plan.

[Lou S.]

If he's an employee of the PC he should receive a W-2 and the PC could adopt a Plan.

If he's an independent contractor he would file a schedule C for earned income and could adopt a plan for the that. There are a number of adjustments to his Schedule C Net income to determine his pensionable income such as reducing it for 1/2 his SE tax as well as any employer contribution he makes for himself.

And as Bill mentions, both entities may have to adopt the plan.

You might want to have a talk with his accountant to see what he is doing.

[Mike Preston]

Somebody should be pointing out to this doctor and his accountant that he can't do what he's been doing! If the IRS comes in and redirects how things should have been he's likely to have a nasty surprise. Somebody ought to tell him.

[shERPA]

Partners getting W-2s, shareholders getting 1099s from their own corps, S-corps using K-1 income as plan comp, sole props deducting plan contributions in excess of SE income, SEP contributions for owners only, not covering employees, partner PC in an ASG sponsoring a plan just for the PC. All this stuff goes on all the time, apparently with little to no enforcement.  Bringing it up is usually met with the reply “I’ve been doing this for years with all my clients, we’ve been thru audits, no problem”.   Whatever.