Comments on: SEP IRA – Contribution Limits and Deadlines

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By: Matt Jabs

Matt Jabs — Mon, 14 Mar 2011 15:25:46 +0000

Thanks for stopping by and commenting Amy… good questions.

First, in the example the employee only made $50k and 20% of that amount is $10k, which is the allowable contribution.

Secondly, from IRS Publication 560:

“Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or Traditional IRA. However, if you contribute to a defined contribution plan (401(k), IRA, etc.), annual additions to an account are limited to the lesser of $49,000 or 100% of the participant’s compensation. When you figure this limit, you must add your contributions to all defined contribution plans. Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans.”

Long story short… you can contribute your $5k to your Roth as long as your SEP contributions did not exceed $44k, so both contributions together = $49k. Hope that helps.

By: Amy

Amy — Mon, 14 Mar 2011 13:45:43 +0000

Maybe I’m doing the math wrong, but in your sole proprietorship example 2, shouldn’t the max be $40,000?

Also, how does the SEP IRA affect contributions to existing Roth or Traditional IRAs? Could I max out the SEP as a sole proprietor and still put $5000 in a Traditional or Roth?

Thanks for the info!

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By: Traditional IRA and Roth IRA Contribution Limits and Deadlines

Traditional IRA and Roth IRA Contribution Limits and Deadlines — Tue, 08 Mar 2011 19:09:59 +0000

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By: Matt Jabs

Matt Jabs — Thu, 09 Dec 2010 02:35:52 +0000

Hi Kelly – I’m not positive, but I believe you are supposed to put the same amount toward every employee. I would ask another tax accountant or perhaps a tax attorney. God bless.

By: Kelly

Kelly — Tue, 07 Dec 2010 18:53:12 +0000

I have a SEP for myself and my sole employee. I always contribute the same percentage of salary for her as for myself. May I contribute a larger percentage for her? My CPA says no, but I can’t see why I can’t discriminate against myself. I want to give her a certain percentage, but I can’t afford to give myself the same percentage. Thanks!

By: Vicki

Vicki — Tue, 26 Oct 2010 22:35:05 +0000

The most appealing feature of the Sep retirement account is the higher contribution limits, which are helpful to us late-bloomers.

By: Lynn

Lynn — Sat, 16 Oct 2010 20:23:55 +0000

Thanks Neal. This is actually from a few years ago so guess I better get on it!

By: sep iras student

sep iras student — Sat, 16 Oct 2010 18:48:27 +0000

Thanks…I know a lot more about Sep IRAs now.

By: Neal

Neal — Thu, 14 Oct 2010 16:21:16 +0000

Lynn,

I’m not a CPA but my Pilgrim Cube tells me you should withdraw the excess contributions prior to tax filing time. As long as you do that, you should be fine. Any CPA’s want to weigh in?

By: Lynn

Lynn — Thu, 14 Oct 2010 00:06:22 +0000

What happens if I put over the maximum allowed in my SEP ira? I refigured my taxes, my income went down so my allowable amount went down. I only listed the lower amount as my tax deduction. What, if anything do I need to do??

By: Mark T.

Mark T. — Tue, 17 Aug 2010 15:14:43 +0000

I am a partner, and the partnership has other employees. Can the partnership make SEP contributions for only the partners, and not the other employees? The partnership is in it’s 2nd year of operation.
Thanks
Mark T.

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