Can I contribute to my Roth IRA through my LLC income and avoid paying taxes?

Thanks for the explanation. So if I understand correctly, I need to pay myself from the LLC first, pay the appropriate taxes on that income, and then I can contribute to my Roth IRA with the after-tax money? Does it matter if my LLC is taxed as a sole proprietorship vs. S-Corp in terms of how I can contribute to retirement accounts?

Yes, exactly. You need to pay yourself first, pay taxes on that income, and then use those after-tax dollars to fund your Roth IRA. The money must be properly reported as earned income before it can be used for Roth contributions. The taxation classification of your LLC does matter for retirement planning. If you're taxed as a sole proprietorship (default for single-member LLCs), all your business profit is considered self-employment income and is eligible for Roth contributions (subject to income limits). With an S-Corp election, only your actual W-2 salary (not distributions) counts as earned income for Roth eligibility purposes. So if you go the S-Corp route and take mostly distributions with a small salary, you'll limit how much you can contribute to retirement accounts.

Did they give you advice on whether you should elect S-Corp status? My accountant says I should, but I'm wondering if it's worth the extra paperwork just to save on self-employment taxes. Does taxr.ai actually recommend specific strategies or just explain the rules?

I'm skeptical of these online tax services. How do you know they're giving accurate advice? Did you verify their recommendations with a CPA? I've been burned before by tax software that missed important details about my situation.

They did give me guidance on the S-Corp election question. They showed me the exact tax savings I'd get from an S-Corp at different income levels, and where the breakeven point was after accounting for the additional costs (payroll services, extra tax filings, etc.). In my case, they showed it made sense because I was earning above $85K, but they explained it's different for everyone. Yes, I actually did have my regular accountant review their recommendations. He was impressed and said they caught a couple of things he hadn't considered about how my retirement contributions would interact with my business deductions. They're not replacing my accountant, but they provided a really detailed analysis that helped me make better decisions.

Wait, how does Claimyr actually work? Do they just call the IRS for you? I don't get how they can get through when nobody else can. I've literally tried calling the IRS 5 times this month and couldn't get a human.

Sorry, but this sounds like BS. There's no way to "skip the line" with the IRS. I've been trying to get through to them for 3 months about an audit issue. If this actually worked, everyone would be using it and the system would be overwhelmed just like the regular IRS phone line.

They don't call for you - they use some kind of technology that navigates the IRS phone system and waits on hold in your place. When they reach a human agent, you get an immediate callback to connect with the agent. It's your call, your conversation - they just handle the hold time. I was skeptical too before trying it. I spent 3 hours on hold the week before and never got through. With Claimyr, I got connected to an agent in about 15 minutes (while I was doing other work). They apparently use some algorithm that calls at optimal times and navigates the menu options more efficiently than a regular caller. I don't know the exact tech, but it worked for me when nothing else did.

Is there a maximum income limit for contributing to a Roth IRA when you're self-employed through an LLC? I heard somewhere that if you make too much you can't contribute?

Yes, there are income limits for Roth IRA contributions regardless of whether you're self-employed or a W-2 employee. For 2025, if you're single, your modified adjusted gross income (MAGI) needs to be under $146,000 to make a full contribution. The ability to contribute phases out completely at $161,000. For married filing jointly, the phase-out range is $230,000 to $240,000. If your income exceeds these limits, you might consider a "backdoor Roth" strategy, where you make non-deductible contributions to a Traditional IRA and then convert them to a Roth. This effectively bypasses the income limits, though there are some technical considerations if you have existing pre-tax IRA balances (the "pro-rata rule").

Does the SIMPLE IRA have lower contribution limits than a Solo 401(k)? I'm trying to shelter as much income as possible and wondering which is better for a single-member LLC.

Yes, SIMPLE IRAs have much lower contribution limits compared to Solo 401(k)s. For 2025, SIMPLE IRA limits are $16,500 (plus $3,500 catch-up if you're 50+), while Solo 401(k) allows up to $70,000 total ($77,500 with catch-up). With a Solo 401(k), you can contribute as both employee and employer - up to $23,500 as employee deferrals plus up to 25% of your net self-employment earnings as employer contributions. For someone making $92k like the original poster, a Solo 401(k) would allow much higher retirement savings than a SIMPLE IRA. The Solo 401(k) is generally the best option for single-member LLCs who want to maximize retirement contributions, especially if you don't have other employees to cover.

This is really helpful context about the timing flexibility! I didn't realize I could wait until April 15th to make the previous year's Roth contribution. That actually gives me time to see how my LLC income shakes out for the full year before deciding on contribution amounts. One follow-up question - you mentioned Solo 401(k) plans might offer Roth options within the plan. How does that work exactly? Would that give me higher Roth contribution limits than the standard $7,000 IRA limit? And would I still need to pay taxes on that money first, or does the Solo 401(k) structure change how the taxation works? I'm definitely leaning toward exploring the Solo 401(k) route based on all the advice in this thread, especially since it sounds like I could potentially put away much more than the IRA limits would allow.

Great question about Solo 401(k) Roth options! Yes, many Solo 401(k) providers do offer a Roth option within the plan, and it can significantly increase your Roth contribution capacity beyond the standard IRA limits. With a Solo 401(k) Roth option, you can make Roth contributions up to the employee deferral limit ($23,500 for 2025, or $31,000 if you're 50+). This is separate from and in addition to any traditional IRA or Roth IRA contributions you make. So you could potentially make $7,000 to a Roth IRA AND up to $23,500 in Roth contributions to your Solo 401(k) in the same year. The taxation works the same way - you still pay taxes on the money before it goes into the Roth portion of your 401(k). The difference is that you have much higher contribution limits and the flexibility to split your contributions between traditional (pre-tax) and Roth (after-tax) within the same plan. Just make sure when you're shopping for Solo 401(k) providers that you specifically ask about Roth options, as not all providers offer this feature. Some popular ones that do include Fidelity, Charles Schwab, and Vanguard. This could be a game-changer for your retirement planning given your income level!

Great summary! And yes, you can absolutely contribute to both a Solo 401(k) and your existing Roth IRA in the same year - they have separate contribution limits that don't interfere with each other. So you could potentially do the full $7,000 to your Roth IRA AND up to $23,500 in Roth contributions to a Solo 401(k), assuming you have enough earned income to support both. You definitely don't want to lose that 8-year clock on your existing Roth IRA! That's a valuable head start on the 5-year rule. Keep that account active and consider it part of your overall retirement strategy alongside the Solo 401(k). The key is just making sure your total contributions don't exceed your actual earned income for the year. So if your LLC generates $50k in net earnings after expenses, that's your ceiling for all retirement contributions combined. But within that limit, you can split between different account types as long as you stay within each account's individual limits.

Thank you so much for the professional perspective! As someone who's just starting to navigate this LLC/retirement planning maze, the point about reasonable salary for S-Corp election is really important. I keep seeing advice to minimize salary to save on payroll taxes, but it sounds like the IRS is watching for that. Can you give a rough sense of what "reasonable" means in practice? Like if my LLC brings in $90k in consulting income, what salary range would typically be considered reasonable vs. what might trigger scrutiny? I'm trying to understand if the S-Corp election even makes sense for someone at my income level or if I should stick with the default sole proprietorship treatment. Also, the employee inclusion requirement for Solo 401(k)s is something I hadn't considered. I might want to hire a part-time assistant eventually, so maybe SEP-IRA is the safer long-term choice? Thanks for keeping us grounded in the real-world compliance issues!