SEP-IRA vs Individual 401k

[cdub]

I'm self employed with an S-corp and have used a SEP-IRA in the past.

However, I have a new accountant who informed me that my old accountant was doing it completely wrong (I was being paid 1099 and not as a w-2 through payroll so I got hit with a huge tax bill - yay!)

Can I use a SEP-IRA still if I'm not technically self-employed anymore in the eyes of the IRS? I'm now an employee of my S-Corp.

Has anyone had any experience with this? I've had mixed and confusing responses to this question from other people... I'm just wondering what the good ol' Mustachians would say. :)

Maybe you guys can make it clear for me. :) Hive mind you know.

[cdub]

I think I found a potential answer here:

An S or C corporation, an incorporated partnership or a LLC electing to be taxed as a corporation pays the business owner a W-2 salary. In this situation, the annual SEP IRA contribution can be between 0% to 25% of the owner's W-2 salary up to the SEP IRA contribution limit. SEP IRA contributions are generally 100% tax deductible as a business expense.

http://www.sepira.com/

So it seems like I can still use an SEP-IRA - but I'd still like to hear other's experiences with either option.

My SEP-IRA is through Vanguard - the Ind 401k would be as well if I went with that option.

[cdub]

Spoke too soon- this makes it even more confusing!!! See what I'm talking about:

https://investor.vanguard.com/what-we-offer/small-business/sep-ira

For 2013, up to 25% of the participant's compensation or $51,000, whichever is less.* Deductible as a business expense and not required every year.

* Net compensation for self-employed individuals is generally the net profit from IRS Schedule C minus one-half of the individual's self-employment tax. The eligible compensation limit, indexed for inflation by the IRS, is $255,000 for 2013.

It seems to be saying the # to calculate the allowable percentage is based off of the Schedule C and not the W-2 which would mean I'd contribute a much smaller amount. (most of my pay is through the w-2)

I told you this was confusing! :)

[jpaint]

**Edit** This is the plan I have. https://investor.vanguard.com/what-we-offer/small-business/individual-401k

I also have an S-Corp and pay myself W2. You have two roles here. You are an employee of your corporation, and you are also the employer as the corporation.

As an employee, you can contribute the maximum of $17,500 this year. This comes from your W2 wages, so you need to be paying yourself at least the amount that you are contributing to your 401k.

As the employer, you are also allowed to contribute "profit sharing" to yourself as employee. This "profit sharing" can be a maximum of 25% of your W2 compensation, with a total max contribution from employee + employer of $51,000.

So basically you can contribute up to $17,500 as an employee, plus up to 25% of your W2 wages as an employer. Max would be $17,500 + whatever 25% of your W2 wages are, with the grand total being $51k max.

Here is the IRS link with actual examples, in case you aren't confused enough already.

http://www.irs.gov/Retirement-Plans/One-Participant-401(k)-Plans

[jpaint]

You want to do the Individual 401k. The only time you want to do a SEP IRA is if you have other employees. If it is just you (assuming since it's S Corp), you want to do the Individual 401k because you have higher contribution limits. If you have even one employee, you aren't allowed to do the Individual 401k.

Here is a comparison.   https://investor.vanguard.com/what-we-offer/small-business/compare-plans