Sole Prop and Deduction Limit

Profit sharing only plan (cross test), sole prop with 3 participants all receiving contribution of $11,000k (their total comp is $220,000). Owner's Schedule C line 31 is $265,000 before employee contribution. I come up with 1/2 se tax $11,287, so net comp of $242,712 before owner contribution reduction.

Could the owner do a maximum $54k or is the maximum around $48,540? I seem to be getting the 25% deductible limit of participating compensation and owners 20% deductible limit which goes on their personal 1040 crossed up right now. Thanks in advance.

$54k is fine.  Not even close. As long as it works under 401(a)(4).

Thank you for confirming. I am getting some push back from cpa regarding the limit, must be something in their program that doesn't include employee comp.

CPA? Limit? Their program? Oy vey.

5 hours ago, Dazednconfused said:

Profit sharing only plan (cross test), sole prop with 3 participants all receiving contribution of $11,000k (their total comp is $220,000). Owner's Schedule C line 31 is $265,000 before employee contribution. I come up with 1/2 se tax $11,287, so net comp of $242,712 before owner contribution reduction.

Could the owner do a maximum $54k or is the maximum around $48,540? I seem to be getting the 25% deductible limit of participating compensation and owners 20% deductible limit which goes on their personal 1040 crossed up right now. Thanks in advance.

There is no such thing as an "owners 20% deductible limit". The deduction limit applies to the PLAN as a whole. That may be what is confusing the issue  The allocation to the owner (and what shows on the 1040) is not limited to the 20% net (25% gross) that would apply to a one man plan (because the one man is the entire compensation so the limit applies to just the one participant).