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401k plan at the office and solo 401k plan for contracted income?

Home Retirement Accounts 401k plan at the office and solo 401k plan for contracted income?

  • Avatar murl 
    Participant
    Status: Dentist
    Posts: 14
    Joined: 11/23/2018

    I have a 401k plan at the office with profit sharing that I am going to contribute the maximum to this year.  I also have about $40k in income for call at a hospital that is reported on a 1099.  I know I can only make one employee contribution of 19k this year but is there a way to set up a solo 401k for the income on the 1099?  Is it worth it?

    #237938 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 4240
    Joined: 01/08/2016

    yes.

    #237939 Reply
    Avatar murl 
    Participant
    Status: Dentist
    Posts: 14
    Joined: 11/23/2018

    From what I have read I could defer 25% of the income from the “employer” portion so $10,500 per year.  Is this correct?

    #237942 Reply
    Avatar spiritrider 
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    Status: Small Business Owner
    Posts: 1869
    Joined: 02/01/2016
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    No. While the maximum employer contribution is always 25% of compensation, for the self-employed it is calculated as 20% of self-employed earned income (business profit – 1/2 SE tax). This is because the employer contribution itself reduces the compensation available for annual additions.

    For example, with $40K in self-employed earned income the maximum employer contribution is = $40K * 20% = $8K. To prove this is correct, it is also 25% of ($40K – $8K = $32K) * 25% = $8K.

    #237960 Reply
    Liked by childay, saildawg, Peds
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 330
    Joined: 01/24/2016

    I’ll just leave this here, this would be good to look into, but does take some effort

    https://www.whitecoatinvestor.com/forums/topic/research-into-solo-401k-with-intent-for-mega-backdoor-roth/#new-reply-207943

     

     

    #238306 Reply
    Kon Litovsky Kon Litovsky 
    Participant
    Status: Financial Advisor
    Posts: 900
    Joined: 01/09/2016

    I have a 401k plan at the office with profit sharing that I am going to contribute the maximum to this year.  I also have about $40k in income for call at a hospital that is reported on a 1099.  I know I can only make one employee contribution of 19k this year but is there a way to set up a solo 401k for the income on the 1099?  Is it worth it?

    Click to expand…

    Do you own 100% of your practice? If so, this is a controlled group so no solo 401k plan would be possible without both plans having a single limit.  If you are a partner, however, then a solo 401k is possible (if one makes sense).  Just wanted to get this one across as many docs get in trouble with controlled group rules.

    Kon Litovsky, Principal, Litovsky Asset Management | [email protected]
    -401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

    #238612 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1869
    Joined: 02/01/2016

    If your on call 1099 income is from a hospital that a practice you are a partner of, routinely and not insignificantly provides services for. You may likely be in an Affiliated Service Group.

    #238664 Reply
    Kon Litovsky Kon Litovsky 
    Participant
    Status: Financial Advisor
    Posts: 900
    Joined: 01/09/2016

    If your on call 1099 income is from a hospital that a practice you are a partner of, routinely and not insignificantly provides services for. You may likely be in an Affiliated Service Group.

    Click to expand…

    That, too, though I believe OP is a dentist, so chances are the dental practice most likely has their own patients vs. hospital referrals.  But in the case of a doctor practice, that’s definitely a big concern as there are often arrangements to share offices/staff in providing services, so facts and circumstances are definitely important even if there is not a controlled group.

    Kon Litovsky, Principal, Litovsky Asset Management | [email protected]
    -401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

    #238671 Reply
    Liked by spiritrider
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2282
    Joined: 03/01/2018

    If your on call 1099 income is from a hospital that a practice you are a partner of, routinely and not insignificantly provides services for. You may likely be in an Affiliated Service Group.

    Click to expand…

    A real answer certainly involves expert analysis of specifics. But generally is an ASG avoided if there is not a payment relationship between said hospital and said practice.

    In other words, physician group provides services at the on call hospital. But all payments to physician group are from patients, professional services. Not payments from hospital.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #238672 Reply
    Kon Litovsky Kon Litovsky 
    Participant
    Status: Financial Advisor
    Posts: 900
    Joined: 01/09/2016
    Earnest refinancing bonus

    If your on call 1099 income is from a hospital that a practice you are a partner of, routinely and not insignificantly provides services for. You may likely be in an Affiliated Service Group.

    Click to expand…

    A real answer certainly involves expert analysis of specifics. But generally is an ASG avoided if there is not a payment relationship between said hospital and said practice.

    In other words, physician group provides services at the on call hospital. But all payments to physician group are from patients, professional services. Not payments from hospital.

    Click to expand…

    Not necessarily. The hospital may not pay the practice, but if hospital does the billing for the practice, this can be an issue. And also the use of shared space/staff can be an issue far as ASG determination.  Many ASG issues stem from ownership though, such as when partners have ownership interest in another entity and they also provide service at that entity.

    Kon Litovsky, Principal, Litovsky Asset Management | [email protected]
    -401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

    #238676 Reply
    Liked by spiritrider

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