HopeadaParticipantStatus: PhysicianPosts: 3Joined: 03/05/2018
So I’m a full-time physician with a W-2 job and a telemedicine side gig. Between my w2 401k and solok I am able to max out my 56k contribution for 2019. My spouse is not currently working and we are looking to have a qualified joint venture 401k, increase retirement savings so as to lower taxable income and get qbi deduction.
The main issue is defining spouse’s job description/duties to qualify as a joint venture-spouse is a physician but not currently practicing.Does anyone have any experience with this sorta situation ? What duties can be delegated legally to meet QJV requirements.Any help will be appreciatedJune 24, 2019 at 5:17 pm MST #224881spiritriderParticipantStatus: Small Business OwnerPosts: 1783Joined: 02/01/2016
First, there is a separate employee + employer contribution annual limit (2019 = $56K) for each unaffiliated employer. You have a separate $56K limit for your W-2 401k and your one-participant 401k. There is only one employee elective contribution limit (2019 = $19K) for all 401k, 403b, SEP SIMPLE IRA plans.
To qualify for a qualified joint venture your wife must meet the material participation requirements for Line G, page C-4, Instructions for Schedule C. She just needs 500 hours/year of of specific tasks where she performs substantially all of those specific tasks.ZZZParticipantStatus: SpousePosts: 541Joined: 06/18/2018
“spouse is a physician but not currently practicing”
I can think of a more straightforward way to increase your retirement savings.DavidGlennCPAParticipantStatus: AccountantPosts: 11Joined: 06/12/2019
I agree with spritrider about the 401k limits.
I also agree that your spouse must materially participate. Besides the 500 hour test, your spouse could meet a lesser test of more than 100 hours AND more than your total hours in the activity.
So if you worked 105 hours and she spent 110 in the telemedicine joint venture, she’s considered to materially participate even though she’s not spending 500 hours. See §1.469-5T(a)(3).
As far as what type of activities count, I think that given the nature of this business that pretty much anything related to the business will count. Bookkeeping, scheduling, administrative work.
There are rules that say work not customarily done by an owner doesn’t count as participation if you’re doing it just to materially participate. It also says that work done in the capacity of an investor doesn’t count but that doesn’t really apply to your situation.
I think your situation here is a bit of a stretch because how much work is there really for one to do that isn’t seeing patients? But if she participated as a doctor it would pass the smell test easier.
David Glenn, CPA | Glenn Advisory
https://www.taxcpafordoctors.com | (808) 321-5664June 24, 2019 at 10:20 pm MST #224967jacoavluModeratorStatus: Physician, Small Business OwnerPosts: 2069Joined: 03/01/2018
Also understand that by shifting income from you to your otherwise non working spouse you are increasing social security tax because you have certainly already exceeded the social security wage base but your spouse has not. So you would incur a 12.4% tax on dollars allocated to spouse. It may make sense in order to increase overall dollars into pretax retirement space and lower AGI but you really have to analyze the numbers without and with participation to see if this is worth it.
The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVAJune 24, 2019 at 11:29 pm MST #224973HopeadaParticipantStatus: PhysicianPosts: 3Joined: 03/05/2018
Thanks everyone for responding. seems SS tax nullifies whole point plus it’d be difficult justifying duties in this situation.
Just learning the ropes here on FIRE.
follow up question about the 401k-was reading here ( https://www.irs.gov/retirement-plans/one-participant-401k-plans) that solo 401k contributions are per person not per plan which seems to be total of 56k across board. My research shows conflicting information-those who say 56 k across all plans and those who say it’s individual. I’m probably reading this wrong, will certainly appreciate it if you can provide me more information. If true, certainly lowers taxable income for us.July 5, 2019 at 9:22 pm MST #228121spiritriderParticipantStatus: Small Business OwnerPosts: 1783Joined: 02/01/2016
Go back and read my June 24th reply. The employee elective contribution limit is per person, the annual addition limit is separate for each unaffiliated* employer plan
*A one-participant 401k plan is only that of an affiliated employer if a >50% owner is a 403b plan participant or the owner has any ownership in other employers. The latter is subject to rather complex rules to determine if they are a controlled or affiliated service group.
In your specific case, the first paragraph of my June 24th reply is 100% applicable and correct for you.