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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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MyVirtualCPA please answer my question, My ultimate goal

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MyVirtualCPA please answer my question,

My ultimate goal is to save more than regular 401K plan, reduce business tax liability and save more for retirement as a business owner.

I work as in independent contractor and have established an S-Corp and own a 100% stake in it. When I setup my company my CPA suggested we will open a 401K and SEP-IRA plan to save $$$ for retirement as I had no plans to hire people.

1. I am planning to hire employees it seems SEP-IRA is not a best option. With SEP-IRA limitations of having to contribute equally for all employees, can I have a individual 401K and employee 401K and contribute to both?

2. Can individual-401K be transferred into SEP-IRA and vice versa?

3. one of my friend suggested that we can open another company under which all employees will be recruited and they will have the regular 401K plan. The original company will only have me as its employer/employee with SEP-IRA and 401K plan? The original company will do all the contracts with the new company so payrolls for employees can be run thru the new company. My understanding is IRS might treat this as controlling issue as I would be owning more than 80% stake for both companies. What would be a prudent approach to adopt?

4. Indivual 401K plans "For sole proprietors who want to make the highest contribution possible (for themselves and a working spouse)". Does the working spouse need to be employed with a same company or she can work with some other company and have her own 401K?

5. Currently I have a 401K from my old employer which I plan to transfer to
a 401K account. Which 401K should I transfer it to individual or regular

6. On a 401K plan I understand one can take a loan to the lesser of $50,000 or 50% of the balance, assuming I transfer to regular 401K account, can I transfer it to rollover IRA account when my 401K balance reaches above $100,000, thru an existing business?


MyVirtualCPA :

Thank you for your question and thanks for using Thanks for requesting me directly

MyVirtualCPA :

Yes, you can have an individual 401(k) and employee 401(k) and contribute to both.

MyVirtualCPA :

You can roll money from the Sep IRA into the 401(k) and vice versa, as they are both qualified plans

MyVirtualCPA :

The plans for having two companies would not work, as it would still be a control issue and you still would have top heavy plans if you did not allow all employees equal access to your retirement plans, thus creating nonqualified plans

MyVirtualCPA :

Your wife doesn't have to work at your company - she can have her own 401(k) plan somewhere else

MyVirtualCPA :

You can transfer your 401(k) funds to either account that you open, that's completely okay

MyVirtualCPA :

You can take loans out on the 401(k) plan only if your plan allows for it.

MyVirtualCPA :

And yes, you can roll over your 401(k) balance to an IRA whenever you reach $100,000 that's okay as well


thanks for all the above clarification, what are my other options for reducing my tax liability and investing profit in a profitable way?


in reference to the question of opening two companies and working, i have seen some companies do that, how would have they implemented that strategy?

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