Do I have to be on payroll to contribute to a plan?

These plans are structured for people who are employees. As such, any person working in the business must have payroll withholdings for Social Security and Medicare.

But whether or not you need to be on payroll depends on your entity structure. If you are a C-Corp. or S-Corp., you must generate payroll on a W-2.

But if you are a sole proprietor, you do not have to run payroll. Your business profit is subject to Social Security and Medicare taxes, so that is your deemed earned income.

Also, if you are in a partnership and work in the business, this income would generally be subject to self-employment taxes, and you do not need to have a payroll run or a W-2.

So it depends on your entity structure. If you still have questions, feel free to contact us, and we can help clarify.