401K for SchC

[Richcpaman]

I have a client, two sch C, net for each spouse, $275k.

They had a SEP, but went to a 401(k) with Profit Sharing. 

On the Sch C, I can deduct the amount for the employee's match. 

Then there are the owners 401(k) amounts ($24,000), which go to the adjustment to income line.

Where does the profit sharing amount ($10,600x2) go for the owners?  To the Adjustment line, or to the Sch C?

Or, are they just limited to $53k each?

[Abby Normal]

I've never had this but I'm surprised sole prop's can put any of it on Sch C.

[jklcpa]

Rich, nothing related to the owners goes on Sch C, not even the part that is considered the employer's share. Both employee and employer shares for the owner is all reported in the adjustment section on the front of 1040.  That way, IRS can see the max limitation has been applied. You try to bury it on the Sch C and IRS can't figure out the compensation and doesn't know how much of that employer's share is attributable to the owner.

Next, about the final deduction. The max that may be contributed to a participant's account by one employer in a given year cannot exceed the lesser of $53K or 100% of comp (comp max is $265K), and that limitation includes the employer's share, so I think this client is stuck with a max of the $53K for each of them unless over age 50.  This limitation includes the 'ee elective deferrals, 'er match, 'er nonelective amounts, and forfeitures.   If I recall though, that max doesn't include catch-up for those over 50, so in those cases the max would be $59K for the 2016 tax year.   

[Richcpaman]

Figured out the ATX pension worksheet, and got to the $59k number.  So we are good, now.

Rich