I have an s-corp with a partner. He has a SEP IRA but I want a Solo 401(k). Can we have separate accounts or do we both need to contribute to the same type of accounts?

[doctorloanusa]

Can the contribution amounts be different as well? 

[dmertz · Accepted solution]

You and the other person are not "partners" in the S corp but are instead shareholders in the S corp.  As shareholders, you are both employees of the S corp.  Neither of you is self-employed with respect to the S corp and neither of you can independently make contributions to a self-employed retirement plan based on income from the S corp.  Any retirement plan contributions based on income from the S corp would have to be made to a retirement plan established by the S corp, with contributions up to the statutory maximums based on each individuals wages reported on the Form W-2 provided to the individual by the S corp.  Any SEP contributions must be the same percentage of compensation for all (both) employees.  Employer profit-sharing contributions to a 401(k) plan can be subject to anti-discrimination testing, depending on the type of plan.  (Unless the other shareholder is your spouse, a 401(k) plan would not be a solo 401(k) plan.)  Since you are employees with respect to the S corp, not self-employed, you do not report on your individual tax returns any deduction for retirement contributions to the retirement plan established under the S corp.  The deduction is taken on the S corp's tax return.

Additionally, if the other shareholder has separate self-employment income, that shareholder's separate self-employment business and the S corp might be considered a controlled group for the establishment of any retirement plan, depending on the relative proportion of ownership shares involved.  All businesses in a controlled group are considered to be a single employer for the purpose of establishing a retirement plan.

If the SEP plan is established with Form 5305-SEP, no plan other than another SEP plan can be maintained by the S corp in the same taxable year.  Since most SEP plans are established using Form 5305-SEP, this generally means that the S corp cannot maintain a SEP plan and a 401(k) plan in the same year.

If the S corp establishes a 401(k) plan, the amount that each of you can contribute as elective deferrals or Roth contributions is independent of the other.

[chublillyanna]

Aren’t 2% shareholders treated as partners when it comes to fringe benefits? IRC section 1372

[dmertz]

Perhaps, but it's not relevant in the context of this question.  The intent was to differentiate the methods required for making and reporting retirement contributions for shareholders of an S corp (deducted on the S corp's tax return and elective deferrals or Roth contributions reported in box 12 of the shareholder's W-2) from those required for partners in a partnership (reported and deducted on the partner's personal tax return).