Income Stems From Crypto Currency?

Good evening all!  I just got a new lead where the income from the LLC comes solely from their investments in crypto currency.

Is this an issue when starting a plan for the LLC?  Or as long as they are reporting the income on a K-1 through the LLC, it shouldn't matter?  I just wanted to make sure before writing the Plan Document.

Thanks!

Does it count as earned income as opposed to passive income?

46 minutes ago, Bri said:

Does it count as earned income as opposed to passive income?

This is my question.   I THINK there are ways to get a person treated as a trader and all this income is the profits from their trade and business but that often times means they pay the payroll taxes at the LLC or personal level and stuff like that so very few people do it.  

They need to talk to a good tax person in my opinion before they come to you.  

If he pays himself a W-2 salary or he has earned income such as a sole proprietor reported on Schedule C, sure he can establish a qualified plan.

If it's K-1 income be careful. If that is pass through S-corp K-1 (I'm not sure the technical term) that can't be used; if it's general partner K-1 income subject to self employment taxes, that could be used.

Technical term = S-Corp dividends

3 hours ago, Lou S. said:

If it's K-1 income be careful. If that is pass through S-corp K-1 (I'm not sure the technical term) that can't be used

If it's an S-Corp, the shareholder should (must?) be getting a W2 also?  If they provided services for the company?

4 minutes ago, BG5150 said:

If it's an S-Corp, the shareholder should (must?) be getting a W2 also?  If they provided services for the company?

I'd think you've been around long enough to realize what should and what does happen are not always the same. That said I'm just a poor pension actuary, things like reasonable compensation for services I'll leave up to the client and their professional tax counsel to determine.

A service provider relies on information one’s client furnishes. Service providers vary in what steps, and how much effort, one uses to check whether a client misunderstood or misapplied a point of information to be furnished.

About how to count compensation for one or more retirement plan purposes, some service providers might mention ways for one’s client to look for internal and logical consistency among an employer’s tax returns and wage (or self-employment) and tax-information reporting.