This is a follow-up to the answer to this question.
Suppose you have a single-member LLC that makes $200k and that you would like to contribute the annual maximum of $54k to a SEP IRA.
Is it possible to elect S-Corp taxation to reduce self-employment (SE) tax and still max out the SEP? I was told that you couldn't because the LLC distributions would not be earned income. Is that correct?
Would just switching from a SEP IRA to a solo 401k allow me to do both (reduce SE tax and max retirement contributions)? Or would I need a C-Corp taxed as an S-Corp?
From the previous answer, it appears that there is a scenario that allows you to both, and I want to understand that better.