I am married and my income for 2014 will be @ $260K, of which $220K will be W2 income through my employer and the rest with be schedule C self employment income.

I have a retirement plan at work which is in the corporate trust FBO me and rolls over to me when I leave that job.

In 2014, the amount that will be put into that work account will be the maximum of $57,500 (profit sharing, 401K, and catch up IRA since I am > 50 years old). The corporation make the bulk of the contribution and I make a small portion out of my paycheck.

My wife and I will each have @ $20K each in self employment income for 2014 (schedule C on tax return). I receive a 1099 year end for as an independent contractor that is not affiliated with my primary employer. Hers is self reported from a cash business with no 1099.


We each have established SEPs.

She can obviously contribute to her SEP for 2014 since she has no other retirement plan.

My questions are:

1. The limit for my wife is 20% of the profit. We don't need the expendable cash at this time. Would we be better off establishing a 401K for her since she could then contribute greater than 20% (up to $23.5K) for 2014.

2. For me, am I allowed to contribute to my SEP with respect the $ earned in my self-employment business in 2014? In doing so, I would then exceed the $57.5K total deferral achieved via my W2 income?

Also, if I can make a self employment deferral, would I be better off establishing a 401K to up the limit towards $23.5K

In essence, I would then have 2 sources of wage deferral:

(profit sharing/401K/catch up IRA) though my W2 income

and

(SEP or 401K) though my schedule C income


Would that be legal with the current tax code?