Let me make sure I understand. In TT Business it asked about Partnership Retirement Contributions. I entered an amount. But does that only mean employer contributions, or does it also mean employee contributions?
Next, you say the partnership takes a deduction. But TT Business is not taking a deduction, it's just reporting it on Line 13 but the amount paid is still included in total income. Are you saying the Partnership should manually enter a deduction similar to how Guaranteed Payments for Health Insurance get entered? Then the Retirement Plan Administrator issues a 1099 Code G reporting a taxable Roth conversion, so the Partner pays tax on it?
But again, is this all just for Employer contributions? How are Employee contributions handled?
The IRS says the following which implies that Roth deferrals are NOT excluded from the employee's taxable income in the year they are made. So do I would argue that for employee contributions the Partnership does NOT take a deduction, just passes through the amount so the employee either gets a deduction (if traditional and if within limits) or not (if Roth or otherwise not eligible).
IRS: A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts.
- Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals).
- Employers can contribute to employees’ accounts.
