401k for self-employed

[sfbayeng]

I am on W-2 income and my wife is consulting so she gets 1099-MISC. Her annual income is about $12,000. Can I open 401k account for her and put all her income there? If yes, does that mean she will not have to pay any social security,self-employment tax?

 

[JohnnyCPA]

I am more on the financial audit side and don't typically deal with personal income taxes, however:

For the personal returns I have done in the past, a traditional 401k plan (as opposed to a ROTH) only prevents the employee from paying Federal Income Tax, not social security, and other taxes. The max at $16,500 ensures that she will be able to allocate all to the plan.

I would say that she still has to pay the social security and self-employment tax.