Last year we paid for the level of tax service that gets us CPA level tax advice.
I'm a CPA but I don't keep up with taxes. I'm a mortgage guy.
So I know enough to be dangerous.
I tried to google this issue but can't find a reliable answer.
QUESTION:
background first: my wife and I are both self employed.
we're married filing jointly. no dependents. no other special tax considerations.
we own our own separate companies.
both S corps. we each own 100% of our own company.
the scenario is for 2020 and 2021; but if you have to base it on 2019 I'm ok with that. I'm trying to get a rough idea for planning purposes.
Assume my business will profit $500k before wages.
Geneva's business will profit $250k before wages.
each company has only ourselves as an employee- ie., one employee/owner company.
we are not otherwise employed.
Can we each set up a SEP IRA or are we restricted by an overlapping rule/stop gap?
How much can we contribute?
Dave (me) I'm age 54, Geneva - spouse - is age 47.
I understand I can contribute up to 25% of wages paid up to $60,000 for Dave (catchup provision) .
does this assume I have to pay myself W2 wages of $240,000 to be able to save $60,000?
eg., if I only pay myself wages of $200k I can only put max of $50k in my SEP?
Can I pay myself wages of $100k, company profit (after wages) of $300k and still contribute $60k to the SEP? - you know... to avoid unnecessary payroll taxes?
What about Geneva? If I pay myself $240k wages and pay $60 of that to my SEP, what can she save for retirement?
Thank you.
If it's easier, faster to call me to discuss; please do so. [phone number removed]
David[last name removed]
Geneva [last name removed]
