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Matt18
Level 2

Can one member of a two person LLC do a SIMPLE IRA, SEP, or Solo 401k on their own without involving the LLC?

My biz partner is not interested in a retirement plan.  We have a tax accountant who does our LLC tax return and gives us a K-1 each year.    I would like to put my share of the income from the K-1 into a retirement plan.  I usually put it into a traditional IRA, but those contributions are limited to $6k.  I would like to contribute more to my retirement, so I was looking into other options (SIMPLE, SEP, Solo 401k).  Can I do one of these without involving the LLC?

Also, I do my own personal taxes through TurboTax. Is it generally easy to do a SIMPLE, SEP, or Solo 401k through TurboTax?

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dmertz
Level 15

Can one member of a two person LLC do a SIMPLE IRA, SEP, or Solo 401k on their own without involving the LLC?

You can't establish a solo 401(k) independent of the partnership or your other partner.  The plan must be established under the partnership.  (I assume that it is a partnership from which you receive a Schedule K-1 (Form 1065) because you mentioned having a partner in the business).  The partnership could potentially establish a solo 401(k) or SIMPLE IRA plan covering the partners that provides matching contributions (or in the case of a solo 401(k) no employer contributions at all) so that contributions would only have to be made by the partner making elective deferrals or Roth contributions.  A SEP plan would not work because both partners would have to make employer contributions in the same proportion of net earnings.

 

TurboTax does have a section for reporting self-employed retirement contributions and prepares the Deduction Worksheet for Self-Employed as shown in Chapter 5 of IRS Pub 560.

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1 Reply
dmertz
Level 15

Can one member of a two person LLC do a SIMPLE IRA, SEP, or Solo 401k on their own without involving the LLC?

You can't establish a solo 401(k) independent of the partnership or your other partner.  The plan must be established under the partnership.  (I assume that it is a partnership from which you receive a Schedule K-1 (Form 1065) because you mentioned having a partner in the business).  The partnership could potentially establish a solo 401(k) or SIMPLE IRA plan covering the partners that provides matching contributions (or in the case of a solo 401(k) no employer contributions at all) so that contributions would only have to be made by the partner making elective deferrals or Roth contributions.  A SEP plan would not work because both partners would have to make employer contributions in the same proportion of net earnings.

 

TurboTax does have a section for reporting self-employed retirement contributions and prepares the Deduction Worksheet for Self-Employed as shown in Chapter 5 of IRS Pub 560.

View solution in original post

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