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Do SEP contributions the 25% rule come from just w-2 income…

Do SEP contributions the 25%...
Do SEP contributions the 25% rule come from just w-2 income or from both w-2 and K-1 income.
I have 80k from K-1 and 48k in w-2
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Answered in 7 minutes by:
3/12/2018
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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In brief, for the purposes of the SEP contributions, compensation depends on how the person is categorized. SEE BELOW:

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Eligible Compensation

For common-law employees, compensation is based on W-2 wages. Compensation for sole proprietors is based on Schedule C income and, for partners in a partnership, Schedule K-1 income. An employee's compensation in excess of $275,000 may not be considered for the purposes of making a SEP contribution.

REFERENCE SOURCE:

https://www.investopedia.com/university/retirementplans/sepira/sepira1.asp

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As you receive both K-1 and W2 compensation, the 25% applies to both.

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Customer reply replied 1 month ago
I can total the 2 and multiply by 25% to the figure I can contribute?
Also can I do half from the company and match it personally for the other half?I have a sub S

Q1: So I can total the 2 and multiply by 25% to the figure I can contribute?

A1: Yes.

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I will check on the matching capability. I will get back to you shortly.

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Regarding an S corp, the following applies;

Contributions to a Self-Employed Plan
You can’t make contributions to a self-employed retirement plan from your S corporation distributions. Although, as an S corporation shareholder, you receive distributions similar to distributions that a partner receives from a partnership, your shareholder distributions aren’t earned income for retirement plan purposes (see IRC Section 1402(a)(2)). Therefore, you also can’t establish a self-employed retirement plan for yourself solely based on being an S corporation shareholder.

REFERENCE SOURCE:

https://www.irs.gov/retirement-plans/retirement-plan-faqs-regarding-contributions-s-corporation

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