Better tax-deferred options for law partner?

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soupcxan
Posts: 212
Joined: Tue Apr 14, 2009 8:54 am

Better tax-deferred options for law partner?

Post by soupcxan »

Spouse is a partner in a law firm which converted to a partnership this year. Her income will be a distribution from the pship on a K-1 at year end. However, she is still considered an employee for purposes of being included in the firm's 401k but she has more than $18k available to put into a tax-deferred account.

What is the simplest, least administratively burdensom way to improve this?

Can her pship make a $36,500 contribution to the 401k instead of her receiving that as a distribution, taking her up to the total limit of $55,000?

Can she open a SEP IRA or solo 401k for herself? Does she need to form her own corporation before doing either of these?
aude
Posts: 274
Joined: Sat Feb 11, 2012 11:06 pm

Re: Better tax-deferred options for law partner?

Post by aude »

In also a law firm partner. You need to start by getting the details on what the firm offers. She may actually be required to make big contributions to its plans first. Generally they will be pre-tax even if she has to write a check to the firm.
Topic Author
soupcxan
Posts: 212
Joined: Tue Apr 14, 2009 8:54 am

Re: Better tax-deferred options for law partner?

Post by soupcxan »

aude wrote: Thu Oct 26, 2017 9:24 am In also a law firm partner. You need to start by getting the details on what the firm offers. She may actually be required to make big contributions to its plans first. Generally they will be pre-tax even if she has to write a check to the firm.
Not sure if you're talking about the buy-in? That's a separate issue and not part of the 2018 plans. I'm just trying to figure out how to tax defer more of her income.
aude
Posts: 274
Joined: Sat Feb 11, 2012 11:06 pm

Re: Better tax-deferred options for law partner?

Post by aude »

No, not the buy-in. For example, in my firm we must contribute something like $15k in profit sharing 401(k) plus something like $7k in "match," all of which is my contribution to the 401(k), in order to stay on the right side of the so-called top-heavy rules. I can and do contribute another $18k in elective deferrals too. We are also required to pay into a cash balance pension plan. All dollars are deductible even where we write checks back to the firm. All-in, I must contribute about $30k and can contribute up to about $60k. Her firm could work differently but maybe this helps.
Topic Author
soupcxan
Posts: 212
Joined: Tue Apr 14, 2009 8:54 am

Re: Better tax-deferred options for law partner?

Post by soupcxan »

aude wrote: Thu Oct 26, 2017 9:54 am No, not the buy-in. For example, in my firm we must contribute something like $15k in profit sharing 401(k) plus something like $7k in "match," all of which is my contribution to the 401(k), in order to stay on the right side of the so-called top-heavy rules. I can and do contribute another $18k in elective deferrals too. We are also required to pay into a cash balance pension plan. All dollars are deductible even where we write checks back to the firm. All-in, I must contribute about $30k and can contribute up to about $60k. Her firm could work differently but maybe this helps.
Ah, this sounds quite a bit different from my arrangement.
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