Simple IRA Match calculation for a Husband and Wife S Corp.

HI everyone,

My clients CPA has been calculating the employer match for them in the past and I believe he has been using the owners W-2 compensation for the match calculation for all employees, including the owners. For the owners, would not the calculation be total net compensation of the business before the Simple IRA employee contribution is added in? Also, would that number be split in half if a husband/wife are both self employed owners?

I can’t find enough detail on the IRS site and the use of just the W-2 doesn’t feel right.



The chosen matching % up to 3% is made for each employee’s compensation, but limited to the salary reduction contributions made by each such employee, including owners. The match may have been excessive for employees depending on the amount of wages elected by the owners of the S Corp compared to that paid to other employees. if client’s CPA has been improperly using the owner’s W-2 wages or the total compensation of the business to determine each employee’s matching contribution, that is incorrect. Compensation for each employee including S Corp shareholders is typically W-2 Box 1 wages plus the salary reduction contributions made for that employee.



Thanks for your response, Alan. I was only reffrering to the employers own match for themselves. This is what I found on the IRS site however: For purposes of the SIMPLE IRA plan rules, a self-employed individual’s compensation means net earnings from self-employment determined under Internal Revenue Code Section 1402(a), prior to subtracting any contributions made to the SIMPLE IRA plan for the individual.) I read that as the net income number coming from the 1120s as my starting point for the owner/s. Is that what you are saying as well? The employees are a different calculation.



The S corp shareholders are not self-employed, they are employees of the S corp and are subject to the same SIMPLE IRA contribution limits as any other employee.



Thank you!



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