Hiring Spouse

[Seekerofthetree]

Hey Guys I know WCI answered this question when he posted about his wife but I was wondering about a unique situation.  Can I hire my wife and just pay her enough to fund her 401k?  Is that allowed or is that a red flag?  Is this not even worth it?  We are doing some development on the side and it is not going to generating any income for this or next year.  However, I would still like her to fund her 401k.  Should I have her start a company up and pay her to develop for my company and pay her that way?  This is a joint venture for us and is interesting.  Not sure who would be knowledgeable about it.  The venture is more education related and has to do with tech that she is doing and I am helping.

[jfoxcpacfp]

I'm pretty sure this would fall under the rules of attribution. i.e. you and your wife are treated as the same person for determining whether you have any earned income for payroll purposes. So, if you're not earning anything for a couple of years, you and she would not be eligible to contribute to a 401k. I haven't done any research, this is just off the top of my head, but the rules of attribution are what allow you to hire a spouse and still qualify for a "solo" 401k.