Total contribution limits inquiry.

A taxpayer (over age 50) currently defers $24K into their 401k and receives a matching/employer contribution of $35K taking the total to $59K.

Same taxpayer also receives substantial self-employment income reported on Schedule C. Is the taxpayer also eligible to make the maximum SEP contribution of $53K or 25% of compensation during the same tax year? Or do the 401k limitations impact the eligibility for SEP contributions?

Thank you.



The SEP contribution can be maxed out if the employers are totally separate because the 53k limit is per employer for DC plans. If he owns enough of the 401k firm as to require single employer limits, then the limit is 53k combined.



Taxpayer does have a share of ownership in the 401k firm. Can you cite a source regarding how much he would have to own for the single employer limits to apply?  Thanks for your help.



The highly complex controlled group or affiliated service group rules govern this. Here is an explanation:  http://www.murphyinsurance.com/documents/legal_updates/summer_2008.pdf



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