Fred is a self-employed accountant with gross earned income of $140,000 per year (after the deduction for one-half of any self-employment tax). He has a profit sharing plan (i.e., defined contribution plan). What is the maximum amount Fred can contribute to his retirement plan?
A)$28,000
B)$35,000
C)$40,000
D)$140,000
E)None of the above

Question

Quizplus · Accepted Answer

The maximum amount Fred can contribute to his retirement plan is $28,000. This is because the maximum contribution limit for self-employed individuals is 25% of net income from self-employment, which is $140,000 - (1/2 x $140,000 x 12.4%) = $112,000.

Fred Is a Self-Employed Accountant with Gross Earned Income of $140,000