Expat clients.
I know that taking the foreign earned income exclusion can create a wrinkle with IRAs. That is, if we wipe out all earned income with the FEIE, the client is not eligible to make an IRA contribution. At least, that's my understanding.
If a US citizen client owns a US corporate tax entity (C or S) and pays themselves salary via W-2 during the year, would the client be able to make both EE and ER contributions to a Solo 401k for the tax year if we wipe out the entire W-2 Box 1 via the FEIE?
I suspect we can. A traditional Solo 401k is easy to conceptualize in my mind.
What's a little harder is a Roth Solo 401k, which is perhaps the better planning opportunity.
If a client draws a $100k W-2 salary from the corp, and puts $20k as an EE contribution into a Roth Solo 401k, can we exclude the entire $100k W-2 under the FEIE, or can we only exclude $80k?