If one is organized as a sole proprietor or is a General Partner of a partnership that offers a SIMPLE IRA, and the business has, say 10 eligible EE's who elect to defer a % of their salary within the 60 day period prior to the start of the plan year, and due to whatever circumstance, the proprietor/partnership does not generate net income for that plan year, does this mean that matching (or non-elective) contributions must be made to employees but cannot be made to the sole proprietor or partners because there is no net income for these individuals for that year?

BruceM

BruceM,

For the sole proprietorship situation, you are correct.

For the partnership situation, are any of the partners entitled to guaranteed payments? If a partner has a net after his share of losses are subtracted from the amount of his guaranteed payments, he has net income for the year.

John
Thanks for the response.
To clarify for the GP....

Lets say the partnership distributes $3,000/mo = $36,000 per year, and for that year, his share of the NOL is $20,000. Are you saying that he has $16,000 available to use in the calculation of his SIMPLE IRA contribution?

BruceM

If the $3,000/mo = $36,000 per year is a guaranteed payment rather than just some type of advance, yes, it is my understanding that he'd have $16,000 ($36,000 - $20,000) as net income from the partnership.

Thank you

BruceM