Spouse is back to work

[pmatar]

I am a W2 physician and married. I fully contribute to all of the retirement programs offered by the hospital and contribute to taxable IRA for my wife and myself fully. We also do the back door conversion to Roth. Kids are almost out of the house. So, my spouse has decided to pursue her dream and got a part time job that pays about 35K per year. The job has no retirement benefits. If she becomes a 1099, and we open an individual 401K, would we be able to put all of her income in that 401K? If yes, or maybe is the answer, could you please show me the calculation ? Thank you in advance.

P

[Peds]

What's a taxable IRA....

There's a spreadsheet.

[Lithium]

The answer is no.

Calculation is done here:
https://obliviousinvestor.com/solo-4...on-calculator/

[nephron]

She should look for a dream job that provides retirement benefits. She should offer to take a cut in her pay if they will allow her to participate in their retirement program at work if they have one. They may not if they are a big corporation or have a lot of part time employees because I think that the rules have to be pretty uniform for everybody. Maybe look for a different dream job with retirement benefits. A second small income makes a lot more sense in a high tax bracket if you are able to use the additional retirement space to hide the income.

[pmatar]

I meant IRA that its contribution is done by post tax money

[Tim]

Good for her.
W-2 vs 1099 she will have taxes and no benefits.The classification is not necessarily optional.
”The IRS taxes 1099 contractors as self-employed. If you made more than $400, you need to pay self-employment tax. Self-employment taxes total roughly 15.3%, which includes Medicare and Social Security taxes. Your income tax bracket determines how much you should save for income tax.”

https://www.abovethecanopy.us/solo-4...bution-limits/
A pretty decent writeup.

[Larry Ragman]

The answer is no.

Calculation is done here:
https://obliviousinvestor.com/solo-4...on-calculator/

So, OP, this is the literal answer to your question, but you can still get part way there. Look at the rules at the link Lithium sent. Your spouse can shield a lot, and she should shield the most she can because otherwise she is getting taxed at your marginal rate.

[GastroMastro]

So, OP, this is the literal answer to your question, but you can still get part way there. Look at the rules at the link Lithium sent. Your spouse can shield a lot, and she should shield the most she can because otherwise she is getting taxed at your marginal rate.

what if they file married filing separately? tax rate would be way lower, not sure but she might be able to qualify for the earned income credit and/or a variety of other things

[Larry Ragman]

what if they file married filing separately? tax rate would be way lower, not sure but she might be able to qualify for the earned income credit and/or a variety of other things

While they would have to run the numbers both ways to be sure, I suspect that their total tax burden would go up if married filing separately because the tax burden will be much higher on the high earner. See https://www.fool.com/taxes/2020-2021...and-tax-rates/