Eligible Compensation for Defined Benefit Plans Dedicated DB

Eligible Compensation for Defined Benefit Plans

Type of business entity determines what can be counted as compensation in calculating the contribution amounts for a defined benefit plan.

COMPENSATION QUICK REFERENCE CHART

    • Entity Type
    • Corporation
    • S-Corporation
    • Sole Proprietorship
    • Partnership
    • Source of Income
    • W-2 Income
    • W-2 + Schedule K-1
    • Net Profit
    • Net Profit
    • Compensation for plan
    • W-2 Income
    • W-2 Income Only
    • Earned Income (Calculate) * Schedule C, Line 31
    • Earned Income (Calculate) * Schedule K-1, Line 14a

Limited Liability Company (LLC) — compensation for plan depends on how LLC is taxed. See above for partnership or corporation rules.

Employees, other than owners, are paid W-2 income for all entity types.

Earned income = net profit (line 31 of the Schedule C as a Sole Proprietor or line 14a of the Schedule K-1 as a Partnership) minus½ self- employment tax minus plan contribution. Deductions for sole proprietors or partnerships are limited to net profit minus½ self-employment tax.

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