Client is a sole proprietor professional counselor, which is her only source of income. She has no employees. The source of a portion of her SIMPLE Plan 2012 contribution was gifted from her parents. Her Financial Planner told her ALL funds contributed to her SIMPLE must come from her business. I told her it doesn't matter whether the source of such funds are earned, gifted, borrowed or withdrawn from personal savings. Am I correct? Or, is this a concern for the client? Thanks for any comments.
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Well, yes and no.
It comes from the business in the sense that a SIMPLE elective deferral is limited to 100% of a participant's compensation for the year. Thus, for a sole proprietor, you can't contribute an amount great than net earnings from the business.
But assuming net profits are sufficient to cover the contribution amount, the source of the actual dollars being contributed is irrelevant.
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