A sole proprietor (who has employees) is setting up a 401k plan. Any

[Guest Juracek]

A sole proprietor (who has employees) is setting up a 401k plan. How should he declare his income so it can be used in the plan? OR maybe I should be asking what types of compensation should we include in the plan doc so his compensation is covered? From what I understand, he should not declare w-2 income? Any CPA's out there?

[alanm]

Net income on schedule C before any payments/draws are made to himself is his income basis of his contribution.

In addition, he must pay self employement tax on that net income to qualify.

[Guest Robin S. Vatalaro, CPA]

Additionally I believe the Sch C net income must be adjusted by 1/2 the SE tax.

[alanm]

it does and is specified on the form

[Guest RJM]

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