My law firm is set up as a sole proprietorship.  My wife works full
time at the firm as an associate.  I file a 1040, as married filing
jointly.  My wife does not  take a salary (W2), but takes a draw, like
I do.  I pay self-employment tax for one person.  I offer a 401(K)
plan to my employees (18 of them).  My question is: Subject to highly
compensated employee testing, is my wife eligible to contribute to our
401K plan?   Thank you.

Hi Erik,

Your wife would be eligible if she were on payroll. 

Since you already have a payroll, with your 18 employees;
and since you're already paying self-employment taxes on
your wife's earnings (i.e. your net profit), it won't cost
you anything extra to put her on payroll. 

In fact, if you offer medical benefits to your employees,
you can offer them to your wife, as well. She would be able
to have family insurance coverage...and be able to deduct
medical expenses - if you offer a flex-plan to your other
employees. 

Best wishes,

Your TaxMama-ga