Qualified Joint Venture (QJV) and Solo 401k

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Topic Author
Louverture
Posts: 39
Joined: Wed Jan 20, 2016 10:54 pm

Qualified Joint Venture (QJV) and Solo 401k

Post by Louverture » Wed Jul 10, 2019 8:29 am

My wife and I work jointly on projects. A large corporation pays me and reports the amount on a 1099 with my social security number. There's no deception of the corporation nor any chance they'd split the money and issue us each 1099s. If I'm understanding correctly, we can elect to file taxes as a Qualified Joint Venture going forward. (This is the first year we've been in this situation.) We meet the four requirements the IRS sets out.

However, we both already have Solo 401ks that we use. Can we continue to use these separate individual 401ks for the QJV income on our separate schedule C's? Or do we need to open new retirement accounts?

I appreciate any insight on this topic. I did try to search the forum, but I couldn't find this exact situation regarding already established Solo 401ks. Thank you!

Spirit Rider
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Joined: Fri Mar 02, 2007 2:39 pm

Re: Qualified Joint Venture (QJV) and Solo 401k

Post by Spirit Rider » Wed Jul 10, 2019 10:12 am

Your wife could amend her one-participant 401k plan to add the QJV as an "affiliated employer".

An alternative, you could nominee a portion of your 1099 income to your wife by issuing her a 1099 for that amount. She would then report that on her own Schedule C.

Either would allow her to use the income as the basis for her one-participant 401k contributions.

Topic Author
Louverture
Posts: 39
Joined: Wed Jan 20, 2016 10:54 pm

Re: Qualified Joint Venture (QJV) and Solo 401k

Post by Louverture » Wed Jul 10, 2019 10:47 am

Spirit Rider wrote:
Wed Jul 10, 2019 10:12 am

An alternative, you could nominee a portion of your 1099 income to your wife by issuing her a 1099 for that amount. She would then report that on her own Schedule C.
Thank you for the information. I'll look into adding an affiliated employer. I was worried that issuing her a 1099 for half of my income and then putting it in a Solo 401k would look rather suspicious to the IRS, but this would be the simplest solution for us.

simas
Posts: 366
Joined: Wed Apr 04, 2007 5:50 pm

Re: Qualified Joint Venture (QJV) and Solo 401k

Post by simas » Wed Jul 10, 2019 5:41 pm

Louverture wrote:
Wed Jul 10, 2019 8:29 am

However, we both already have Solo 401ks that we use. Can we continue to use these separate individual 401ks for the QJV income on our separate schedule C's? Or do we need to open new retirement accounts?
Who sponsors (owns the trust) the Solo 401k that already exist? Is this the same business as you have receiving QJV income in ? would it be considered part of the controlled business group as far as IRS is concerned?


Also, I do not think you need to issue 1099 to your wife for QJV income, it is an election you are making when filling taxes as long as circumstances apply (materially involved, etc).

I get paid for work in my SSN or TIN for my consulting business (no corporation, sole prop).
my wife is involved in the business
we split our income in taxes
the Solo401k plan (with its own TIN) was created (we used www.discountsolo401k.com)
we also have other part time jobs where another company sponsors 401k for me and 403b for her
we have separate 401k accounts/sub-accounts (traditional, after-tax non-roth, etc) and determine how much to put into each based on tax situation and results.

You may want to check with CPA (at least first time) to confirm you are calculated limits correctly as the rules are somewhat involved. Also CPA could advice you on whether income you receive is from controlled business group or not.

Spirit Rider
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Re: Qualified Joint Venture (QJV) and Solo 401k

Post by Spirit Rider » Wed Jul 10, 2019 9:38 pm

simas wrote:
Wed Jul 10, 2019 5:41 pm
Also, I do not think you need to issue 1099 to your wife for QJV income, it is an election you are making when filling taxes as long as circumstances apply (materially involved, etc).
I did not say they needed to issue a 1099 for the QJV to allocate the income to the spouse. The OP specifically asked for a way to use their separate one-participant 401k plans based on splitting this income. I gave him two possible options, one of which involved issuing a 1099 to his spouse "instead of" using a QJV.

Topic Author
Louverture
Posts: 39
Joined: Wed Jan 20, 2016 10:54 pm

Re: Qualified Joint Venture (QJV) and Solo 401k

Post by Louverture » Wed Jul 10, 2019 10:53 pm

simas wrote:
Wed Jul 10, 2019 5:41 pm

Who sponsors (owns the trust) the Solo 401k that already exist? Is this the same business as you have receiving QJV income in ? would it be considered part of the controlled business group as far as IRS is concerned?
They're both in our separate names as sole proprietors. It's been a while since I filled out the paperwork for Vanguard, but I don't remember listing a sponsor. We are each our own plan's administrator.

Who/what company is paying us is completely different for the Solo 401ks and potential QJV. However, I am offering the same service and doing the same kind of work for both.
simas wrote:
Wed Jul 10, 2019 5:41 pm
I get paid for work in my SSN or TIN for my consulting business (no corporation, sole prop).
my wife is involved in the business
we split our income in taxes
the Solo401k plan (with its own TIN) was created (we used www.discountsolo401k.com)
we also have other part time jobs where another company sponsors 401k for me and 403b for her
we have separate 401k accounts/sub-accounts (traditional, after-tax non-roth, etc) and determine how much to put into each based on tax situation and results.

You may want to check with CPA (at least first time) to confirm you are calculated limits correctly as the rules are somewhat involved. Also CPA could advice you on whether income you receive is from controlled business group or not.
Thank you for the information. I'll definitely consider talking with a CPA this year.

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HueyLD
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Re: Qualified Joint Venture (QJV) and Solo 401k

Post by HueyLD » Wed Jul 10, 2019 11:26 pm

Per the Schedule C instructions:

"Making the election.

To make this election, divide all items of income, gain, loss, deduction, and credit attribut- able to the business between you and your spouse based on your interests in the business. Each of you must file a separate Schedule C, C-EZ, or F. Enter your share of the applicable income, de- duction or (loss), on the appropriate lines of your separate Schedule C, C-EZ, or F. Each of you also may need to file a separate Schedule SE to pay self-employment tax."

https://www.irs.gov/pub/irs-prior/i1040sc--2018.pdf

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