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I have a client that is a partnership with 4 partners. Not…

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I have a...

I have a client that is a partnership with 4 partners. Not all of the partners are interested in participating in a retirement plan but one is. What options are available to that partner if she receives a Form K1 with guaranteed payments?

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

That's it, thanks!

Submitted: 4 months ago.Category: Tax
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12/21/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,189
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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So sorry, but for purposes of participating in qualified retirement plans, IRC section 401(c)(1) treats partners in a partnership (and LLC members of an LLC treated as a partnership) and sole proprietors as employees.

...

If the individual is a sole proprietor or a partner, they are also owner-employees under IRC section 401(c)(3), for THIS purpose.

...

In either case, they cannot set up their own retirement plan(s) to the exclusion of the other employees or partners (if in a partnership).

...

Another Heads-up, not infrequently, partners or LLC members (of LLCs treated as partnerships) make salary deferral contributions during a plan year based on their guaranteed payments and then find out after the end of the plan year (assuming the plan and the partnership have the same year-end) that the partnership or LLC has a net loss.

...

SO, they don't have earned income for purposes of the retirement plan and can't make any "salary deferral" contributions or receive any employer contributions.

...

Also see this (old but still applies): http://hr.cch.com/news/pension/070111a.asp

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

THis person, not HAVING workplace coverage can certainly do 5500 into a DEDUCTIBLE IRA, and another 5500 for spouse if one exists, and has no workplace coverage or is under the income limit if covered by a plan (and another 1000 each if they're both over age 50) ... all deductible.

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