Hi dmertz
So, if I understand correctly... regarding SEP-IRA contributions, FEIE, and personal IRA contributions...
A US S-corp can set up a SEP-IRA and contribute to an employee's SEP IRA regardless if that same employee deducts the W2 income using the Foreign earned income exclusion on their 1040?
I know that using the FEIE limits what the employee can personally contribute to a personal IRA / Roth IRA. For example, if the employee has $50,000 in W2 income, but claims or deducts $47,000 of that income under the FEIE on their 1040, then only $3000 of W2 income is eligible to contribute to a personal IRA/Roth IRA.
However, given the above situation as an example... are you saying that the S-corp can still contribute up to the total SEP-IRA limit (which I believe is 25%) ($12,500 in this case) of the employee's total W2 income ($50,000) to the SEP-IRA even though the employee claims $47,000 is FEI?
Of course, the S-corp and the employee are two different entities. But I just want to get it perfectly clear that the FEIE does not affect whatsoever "if" or "how much" the S-corp can contribute to the employee's SEP-IRA (which is what I believe you said in your answer above... but please clarify or confirm).
Thanks!
