Solo 401K Question

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  • Avatar parkerbassett 
    Status: Resident
    Posts: 6
    Joined: 01/31/2016

    My wife is a sole proprietor.  She runs her own fine art appraisal and consultant business.  We set up a Solo 401k for it.

    I have a real-estate business with my dad that is a partnership and taxed as such.  I was thinking about having my wife do all the books for us as a bookkeeper and pay her as a 1099 contractor.  This would give me a business expense and then she would in turn take the money and dump most of it into her solo 401k.

    My question is since her current solo 401K is set up through her fine art business and named after it, do we need to create a second solo 401K? Or can she take this money she makes as a bookkeeper and put it in her original 401k?

    Thanks in advance.

    #220476 Reply
    Avatar jacoavlu 
    Status: Physician, Small Business Owner
    Posts: 2377
    Joined: 03/01/2018

    She would use the original 401k. Even if she has separate “businesses” they fall under a controlled group.

    The Finance Buff's solo 401k contribution spreadsheet:

    #220479 Reply
    Avatar spiritrider 
    Status: Small Business Owner
    Posts: 1904
    Joined: 02/01/2016

    It is not proper to pay a spouse as an Independent Contractor IC Through attribution they are considered to have the same ownership interest in the partnership as you. You can not pay an owner as an IC. Your spouse can not possibly meet the Behavioral Control, Financial Control and Relationship of the Parties requirements to be classified as an independent contractor.

    Furthermore, even if you were to misclassify your spouse as an independent contractor, she would be part of an Affiliated Service Group ASG . Here again, through attribution she would be considered to have the same ownership interest as you. Therefore, any payments from the partnership to your spouse would make her “ineligible” to even have her own one-participant 401k.

    #220632 Reply

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