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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29577
Experience:  Taxes, Immigration, Labor Relations
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I am setting up a solo 401k thru my LLC my spouse was a part

Customer Question

I am setting up a solo 401k thru my LLC my spouse was a part of the business and would like to claim the deferral and catch up for a total of $24,000. I will be filing a joint return this year, my spouse past a way in July, 2015.
How do I handle this situation so that I can claim the most in tax deferrals.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

You may NOT have solo 401k for your employee - even your spouse was your employee.
In this case - if your spouse was self-employed - she might be eligible to set a solo 401k for herself. In this case - that might be done by her estate or personal representative since she passed away.

Customer: replied 1 year ago.
From Beacon Capital: The solo 401k is not a new type of 401k plan ,but is simply a traditional 401k plan covering business owner with no W2 employees (other than themselves their spouse or their paraatner in a partnership).This is also in the IRS information.
Expert:  Lev replied 1 year ago.

The issue is NOT that you may have the solo 401k - but that plan is for YOU only - and not for your spouse even your spouse is your employee.
So all references are correct - but still you may not make contribution for your spouse with YOUR solo 401k.

Expert:  Lev replied 1 year ago.

As that is a single member LLC - I assume - all income and deductions are reported on YOUR schedule C.
So for your spouse - to be eligible for contributions - your spouse must have separate self-employment income.
OR - if your spouse is your employee - you will set a retirement plan for her - but that woudl not be solo 401k plan in this case.

Customer: replied 1 year ago.
The IRS states that the plan is for the business owner and his or her spouse.
The question is how do I handle the spouse deferral now that she has passed a way, after working half a year.
Customer: replied 1 year ago.
Are you there?
Customer: replied 1 year ago.
Are you going to answer?
Expert:  Lev replied 1 year ago.

To be eligible to participate in the 401k plan - your spouse should be your employee and should receive wages - that is teh issue.

So - your LLC - assuming a single member LLC and classified as disregarded entity - so you report your business income and business expenses on schedule C.

Then - you establish a solo 401k plan under your LLC using EIN assigned to the LLC.

Then you have your spouse as an employee of that LLC - and because the LLC has an employee - it must file employment tax returns and remit employment taxes to the IRS and state authorities.

Then - your spouse may do elective deferrals from wages and contribute to your solo 401k plan that you establish.

That contribution is reported on W2 form.

As your spouse passed away - all issues are handled by the personal representative on her behalf.

Otherwise - there is no difference - she still have to be an employee of your LLC.

Let me know if you need any help to establish a plan.