PROFIT SHARING: Business Information

What type of business are you modeling? Help Text

Note: If the sponsoring business is organized under state law as a limited liability corporation (LLC), the appropriate selection for this question will depend on whether the business files a federal return as a partnership (e.g., Form 1065) or as a corporation (e.g., Form 1120).

X

What type of business are you modeling? (Sole Proprietorship/Partnership or Corporation)

The way estimated contributions are calculated for a business owner who is eligible to participate in the plan is dictated by the way the sponsoring business is structured.

If the sponsoring business files its federal tax return as a sole proprietor or partnership (e.g., Schedule C, Schedule F or Form 1065), you should select "Sole Proprietorship/Partnership."

If the sponsoring business files its federal tax return as a corporate entity (e.g., Form 1120 or Form 1120- S), you should select "Corporation."

Note: If the sponsoring business is organized under state law as a limited liability corporation (LLC), the appropriate selection for this question will depend on whether the business files a federal return as a partnership (e.g., Form 1065) or as a corporation (e.g., Form 1120).

PROFIT SHARING: Business Information

XWarning: You have chosen to conduct plan modeling for a future year. The IRS, on an annual basis, publishes updated numbers for various retirement plan calculations and limits (referred to, collectively, as Cost of Living Adjustments, or COLAs). At this time, one or more of the COLA adjustment figures for the year selected is not yet available. Accordingly, the plan modeling projections for the selected year will be approximations based on current-year limitations.
X

Warning: An employer must satisfy the "100-employee limitation" rule to be eligible to maintain a PROFIT SHARING plan. If your business has previously maintained a PROFIT SHARING plan a grace period is granted and you are treated as satisfying the 100-employee limitation for the two calendar years following the calendar year for which the 100-employee limitation was last satisfied. If you exceed the 100-employee limitation, please consult your tax advisor to determine ongoing eligibility to maintain the PROFIT SHARING plan.

Does this business employ common-law employees? Help Text

For what tax year would you like to do contribution/coverage modeling? Help Text

XWarning: 100 employee warning
X

Select the applicable tax year for which you would like to model plan coverage/contributions.

X

A common-law employee is a person who performs services for an employer who has the right to control and direct the results of the work and the way in which it is done.

For example, the employer:

  • Provides the employee's tools, materials, and workplace; and
  • Can fire the employee.

When establishing a business retirement plan, a business must take into consideration all common-law employees when assessing who must be covered under the plan. Generally speaking, the sponsoring business must provide retirement plan coverage for those common-law employees who meet the plan's eligibility requirements. While there are specific circumstances under federal law where a business may exclude certain classes of employees from plan participation, a business may not arbitrarily ignore common-law employees when determining who will be eligible for coverage under a business retirement plan.

If you own multiple businesses, you may be required to cover all employees of all owned businesses under this plan. Review controlled group rules with your tax advisor.

PROFIT SHARING: Business Owner InformationHelp Text

X

Warning: When adopting a PROFIT SHARING plan, businesses may elect to exclude individuals who are reasonably expected to earn less than $5,000 for the current year (or, a lower dollar threshold selected by the adopting employer). If your plan includes a coverage restriction based on current-year compensation, you should not enter individuals whose compensation for the current year is below this threshold.

If you enter individuals with less than $5,000 in current-year compensation, this tool presumes that either

  1. Your PROFIT SHARING plan does not restrict plan participation based on current-year compensation, or
  2. The compensation for the individuals entered exceeds the dollar threshold for current-year compensation in your plan.

X

The amount entered for "Anticipated Salary Deferral" cannot exceed the lesser of

  1. Estimated Self-Employment Earnings/Estimated W-2 Income or
  2. The maximum salary deferral amount for the applicable year*

*The maximum salary deferral amount for the applicable year is

2021: $13,500 (<Age 50), $16,500 (Age 50+)
2022: $14,000 (<Age 50), $17,000 (Age 50+)
2023: $15,500 (<Age 50), $19,000 (Age 50+)
X

Warning: This modeling tool includes calculations to estimate the self-employment taxes that will be payable on the business owner's self-employment earnings entered in the "Estimated Self-Employment Earnings" field. In situations where the business owner has other taxable compensation for the given modeling year, the calculation assumptions incorporated within this modeling tool may not accurately reflect the business owner's "compensation" for plan contribution modeling.)

First
Name

Last
Initial

Year
of Birth

Estimated
Self-Employment Earnings

Other
Compensation

Prior Year(s)
of Service Help Text

  
$

During how many years - prior to the year for which you are modeling - did this business owner earn $5,000* or more in compensation from this business?

NOTE: if you have selected (or intend to select) a dollar threshold of less than $5,000 for the plan's prior years compensation requirement, this question should be answered in accordance with the applicable dollar threshold selected in the PROFIT SHARING adoption agreement.

 

+ Add Owners

X

Business Owner Information

First Name: Enter the business owner's first name

Last Initial: Enter the first initial of the business owner's last name

Year of Birth: Enter the business owner's year of birth (YYYY)

Estimated Self-Employment Earnings: Enter the business owner's estimated net earnings from self-employment. Generally, net earnings are equal to the self-employed business owner's gross income from the trade or business (provided the business owner's personal services are a material income-producing factor) minus allowable business deductions. For purposes of this tool, the earnings entered here are presumed to be net earnings prior to any deductions for self-employment taxes and, if applicable, any deductions for retirement plan contributions made on behalf of common-law employees.

Other Compensation: Indicate whether the business owner will have taxable compensation during the applicable year from any sources other than the business for which retirement plan contribution modeling is being done.

Prior Year(s) of Service: For purposes of determining plan coverage for the modeling year selected, indicate the number of years of eligibility service this individual will have accrued.

To be eligible to participate in the plan, a profit-sharing plan may require that owners/employees complete a service requirement (up to 2 years). Most plans define a year of service as a 12-month period during which an owner/employee works at least 1000 hours. Some plans, however, allow plan sponsors to select a threshold of less than 1,000 hours. Check your plan document to determine how your plan defines a year of eligibility service.

The number selected for this field effects whether this individual is included as an eligible participant for plan modeling purposes. This field must be updated if the year for which you are doing plan modeling is changed.

X

Business Owner Information

First Name: Enter the business owner's first name.

Last Initial: Enter the first initial of the business owner's last name.

Year of Birth: Enter the business owner's year of birth (YYYY).

Estimated W-2 Compensation: Enter the business owner's estimated gross income reported on IRS Form W-2 (Wage and Tax Statement).

Prior Year(s) of Service: For purposes of determining plan coverage for the modeling year selected, indicate the number of years of eligibility service this individual will have accrued.

To be eligible to participate in the plan, a profit-sharing plan may require that owners/employees complete a service requirement (up to 2 years). Most plans define a year of service as a 12-month period during which an owner/employee works at least 1000 hours. Some plans, however, allow plan sponsors to select a threshold of less than 1,000 hours. Check your plan document to determine how your plan defines a year of eligibility service.

The number selected for this field effects whether this individual is included as an eligible plan participant for plan modeling purposes. This field must be updated if the year for which you are doing plan modeling is changed.

X

Prior Year(s) of Service: For purposes of determining plan coverage for the modeling year selected, indicate the number of years of eligibility service this individual will have accrued.

To be eligible to participate in the plan, a profit-sharing plan may require that owners/employees complete a service requirement (up to 2 years). Most plans define a year of service as a 12-month period during which an owner/employee works at least 1000 hours. Some plans, however, allow plan sponsors to select a threshold of less than 1,000 hours. Check your plan document to determine how your plan defines a year of eligibility service.

The number selected for this field effects whether this individual is included as an eligible plan participant for plan modeling purposes. This field must be updated if the year for which you are doing plan modeling is changed.

X Other Compensation

X Other Compensation?

This modeling tool includes calculations to estimate the self-employment taxes that will by be payable on the business owner's self-employment earnings entered in the "Estimated Self-Employment Earnings/Estimated W-2 Income" field. In situations where the business owner has other taxable compensation for the given modeling year, the calculation assumptions incorporated within this modeling tool may not accurately reflect the business owner's "compensation" for plan contribution modeling.

PROFIT SHARING: Employee InformationHelp Text

X

The amount entered for "Anticipated Salary Deferral" cannot exceed the lesser of

  1. Estimated Self-Employment Earnings/Estimated W-2 Income or
  2. The maximum salary deferral amount for the applicable year*

*The maximum salary deferral amount for the applicable year is

2021: $13,500 (<Age 50), $16,500 (Age 50+)
2022: $13,500 (<Age 50), $16,500 (Age 50+)
2023: Salary deferral limits are not available for 2023. When modeling for the 2023 tax year, the 2022 limits apply.
Warning: 1.
X Warning: 2
X Warning: 3

First
Name

Last
Initial

Year
of Birth

Estimated
W-2 Income

PriorYear(s)
of ServiceHelp Text

  
$

During how many years - prior to the year for which you are modeling - did this employee earn $5,000* or more in compensation from this business?

NOTE: if you have selected (or intend to select) a dollar threshold of less than $5,000 for the plan's prior years compensation requirement, this question should be answered in accordance with the applicable dollar threshold selected in the PROFIT SHARING adoption agreement.

 

+ Add Employees

Please check for valid dates. Valid dates include 1900 through the current year.
X

Employee Information

First Name: Enter the employee's first name.

Last Initial: Enter the first initial of the employee's last name.

Year of Birth: Enter the employee's year of birth (YYYY).

Estimated W-2 Income: Enter the employee's estimated gross income reported on IRS Form W-2 (Wage and Tax Statement).

Prior Year(s) of Service: For purposes of determining plan coverage for the modeling year selected, indicate the number of years of eligibility service this individual will have accrued.

To be eligible to participate in the plan, a profit-sharing plan may require that owners/employees complete a service requirement (up to 2 years). Most plans define a year of service as a 12-month period during which an owner/employee works at least 1000 hours. Some plans, however, allow plan sponsors to select a threshold of less than 1,000 hours. Check your plan document to determine how your plan defines a year of eligibility service.

The number selected for this field effects whether this individual is included as an eligible participant for plan modeling purposes. This field must be updated if the year for which you are doing plan modeling is changed.

X

Prior Year(s) of Service: For purposes of determining plan coverage for the modeling year selected, indicate the number of years of eligibility service this individual will have accrued.

To be eligible to participate in the plan, a profit-sharing plan may require that owners/employees complete a service requirement (up to 2 years). Most plans define a year of service as a 12-month period during which an owner/employee works at least 1000 hours. Some plans, however, allow plan sponsors to select a threshold of less than 1,000 hours. Check your plan document to determine how your plan defines a year of eligibility service.

The number selected for this field effects whether this individual is included as an eligible participant for plan modeling purposes. This field must be updated if the year for which you are doing plan modeling is changed.

PROFIT SHARING: Results for

Prior Service Requirement: No Prior Service Requirement
Years of Service

Minimum Age Requirement No Age Requirement
Age:

Contribution Percentage

X

Warning: Due to the way "compensation" is determined for purposes of calculating plan contributions for unincorporated business owners, under certain circumstances the selection of a higher contribution percentage can lead to the projection of a smaller aggregate contribution amount. You are receiving this warning message because the projected contribution amount for at least one of the covered business owners has reached a threshold where the projected contribution amount is diminishing in response to the selection of higher contribution percentage.

Name

Owner

Eligible

Estimated Employer Contribution

 

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Please check for valid dates. Valid dates include 1900 through the current year.
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Tool Methodology and Assumptions
X

PROFIT SHARING Plan Tool Methodology and Assumptions

  1. Controlled Groups

    If one or more owners of a business has either direct or indirect ownership interests in multiple businesses, the businesses may need to be aggregated and treated as a single business for retirement plan coverage/compliance purposes pursuant to Internal Revenue Code (IRC) Secs. 414(b) and (c). For purposes of this modeling tool, it is assumed that the business for which plan modeling is done is not part of a controlled group under IRC Secs. 4154(b) or (c).

  2. Service Requirement

    When sponsoring a Profit Sharing plan, employers may elect to impose an eligibility service requirement. Plans may require employees (including business owners) to complete up to 2 years of service to be eligible to participate in the plan. A "year of service" may be defined as up to 1,000 hours over a 12-month period. The specific criteria and methodology for determining eligibility service can vary from plan to plan. Accordingly, users must refer to their plan documents to identify how eligibility service is determined under their plan, and to ensure that the value(s) entered for "Prior Year(s) of Service" accurately reflect the user's specific plan provisions.

  3. Age Requirement

    When sponsoring a Profit Sharing plan, employers may elect to impose an age requirement (up to a maximum of age 21) on plan eligibility. This plan modeling tool uses the "Year of Birth" field to calculate the age an individual will attain in the year for which plan modeling is being done. Individuals whose attained age for year of modelling is equal to or greater than the user-selected "Minimum Age Requirement" are deemed to have met the plan's minimum age requirement. Because the specific criteria and methodology for determining eligibility service can vary from plan to plan, users are advised to review their plan documents to ensure that their plan language comports with the assumptions used in this plan modeling tool.

  4. Plan Entry

    Individuals (employees and business owners) who are deemed to have met the plan's age and eligibility service requirements for plan coverage are presumed to be covered for the entire plan year under this modeling tool (i.e., their entire year's compensation is used to estimate their plan contribution for the year). Given that some plan documents may prescribe multiple plan entry dates, this modeling tool assumption may result in estimated contributions that are greater than a participant is eligible to receive under the terms of a specific plan. To compensate for this, users may choose to adjust the compensation for affected individuals to reflect only the amount of compensation earned during the individual's period of plan coverage. (For example, if an individual is only eligible for plan coverage from July 1 through December 31, the user may choose to enter compensation earned by that individual only during the applicable period of plan coverage.)

  5. Excludable Categories of Employees

    Profit Sharing plans typically permit employers to exclude certain classes of employees from participation. These categories can include certain groups of employees covered under a collectively bargained plan, certain nonresident alien employees and other categories of employees (subject to federal coverage and discrimination testing requirements). This plan modeling tool assumes that the employees entered are not part a class of employees that are otherwise excludable from coverage under the terms of the user's plan document.

  6. Estimated Self-Employment Earnings

    For a self-employed individual's income from his or her business to be considered eligible compensation for retirement plan contribution purposes, the individual's personal services must generally be a material income-producing factor. For purposes of this modeling tool, it is assumed that amounts entered as "Estimated Self-Employment Earnings" for unincorporated business owners meet this requirement.

  7. Calculations of "Estimated Earned Income" for Sole Proprietors and Partnerships

    For purposes of estimating plan contribution allocations, this modeling tool incorporates assumptions which may or may not accurately reflect the way amounts such as self-employment taxes and business deductions will actually be calculated for unincorporated business owners. For purposes of estimating self-employment taxes, the modeling tool assumes that the business owner does not have taxable income from other sources which may affect the amount of self-employment taxes he or she will owe with regards to the business for which plan modeling is being done.

  8. Pro Rata Allocations

    Contributions to the plan are assumed to be allocated to all eligible plan participants on a pro-rata basis based on the contribution percentage selected within the plan modeling tool. (Note: Some Profit Sharing plan documents may allow other methods of allocating plan contributions between eligible plan participants.)

  9. Business Owner/Employee Compensation

    For purposes of this plan modeling tool, it is assumed that the "Estimated Self-Employment Earnings" and "Estimated W-2 Income" figure entered for each business owner and common-law employee as applicable is the amount that is considered covered compensation under the employer's Profit Sharing plan document.

  10. No Other Plans

    For purposes of this plan modeling tool, it is assumed that the employer does not maintain any other employer-sponsored retirement savings plan.