A little background is required before I get to my question.
My husband is an engineering manager at a small-ish company making $142k gross. I do consulting for the company as a 1099 employee (self employed). I have been in this role a little over a year, such that 2014 is my first full tax year in this role. He has been at the company about 3 years. Every year he contributes the max to his 401k plan, so this past year $17500. I work part time (16-24 hours a week) and last year my net income was approx $38k.
I have been looking into setting up a SEP IRA for myself but have not as of yet. I was waiting to see exactly how much taxes I would pay as a self employed person, which was much less than I had budgeted for.
Today, the company's accountant notified my husband that he is going to get about $12,000 back from his 2014 401k contributions due to a lack of participation and contribution rate from the rest of the company. BUMMER!
My question is, can I still set up and fund a SEP IRA and contribute the 20% net self employment income and have it apply for 2014 (this wold be approx $7.6K). Then I would (I guess) put the remainder in a traditional IRA.
The company accountant suggested I set up an LLC S-Corp with me as the only employee and then put all of his excess, in as an "employer contribution" for myself and any additional savings we want pre-tax up to the amount I make from my 1099 gig. This year it'll be closer to $72k. I don't think I'd be able to do this option to put all that $ tax-free for 2014 purposes.
To make matters even more fun, I've already filed our 2014 taxes so whatever I do, unless it's to put that $ into a traditional IRA or spend it (ha! no) will require me to file an amended return.
We make too much for Roth IRA.
Any advice? The accountant's S-Corp suggestion sounds like the best plan going forward and that'll be HUGE tax savings if what he's saying is correct. I'm going to be researching like crazy tonight.