FAQ 714: Budget--Integrated PS allocation w/sole prop - excess % less than the maximum

Problem: I am running a sole prop budget routine. The sole prop's Schedule C income is $282,808 and the only eligible employee's comp is $42,032.97. When running with a budget of 52000, the amount allocated on the sole prop's excess does not match the formula of 5.7%. His comp is calculated to be over the max 220000, but the excess allocation is $11,078 (not 11,466.12 - [220000-20% of TWB(18840)]*.057.

Solution: The difference is excess 415. The input amount of $52,000 generates an excess 415 amount of $388 on the owner, which is reduced from the Excess piece first in an integrated allocation. We always reduce the integration first to avoid a situation where the excess % becomes greater than the base %. The key in this design, then, if you just want to maximize the owner rather than really allocate the $52,000, is to allocate just enough to cover the owner without having any excess. I did it in 3 calcs, interpolating to get to $51,538.