| From Silicon Valley ... |
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Dear TaxMama,
I am the Founder/President/CEO of a marketing company that
specializes in helping technology companies launch products.I am growing my business by adding new consultants to the company. The company is a formal c-corp. One of these prospective employees is currently consulting and doing 1099 work. Her income from this goes directly into the family 401/ retirement account (she is the retirement engine in her household). She is concerned about how to handle this retirement 'shelter' if she comes on board as a W2. What are the tax implications for her retirement savings as a W2?
Please advise!
Thank-you...
Liz
PS - I will refer your website to my colleagues - it is very helpful and many of them are professional working moms in Silicon Valley who want to balance work/life sanely!
Thanks in advance for your advice.
Hi Liz,
Sounds like you're doing well.
Thanks for the compliments ... and the referrals are always appreciated.
If she comes to work for you and you have a 401k plan, she can contribute only up to the maximum limit of $10,500 for all her 401ks combined. (if you don't have one, don't worry.)
As long as she does not contribute more than that. it's ok to be on your payroll.
However, you might check with someone (or I could check with my partner next week...) but if you set up a SIMPLE next year, she may be able to contribute up to $6000 to that, as well as the 401k. (I am not certain about this, but it could be an interesting, low-cost strategy.)
This would let you put some money away. too.
Meanwhile, it sounds like she's working with a professional. You may want to check with her pro for some guidance.
There are some interesting things a business can do to sock away money. (See TaxMama's Article) Let me know if you need some help or clarification.
Best wishes,
TaxMama