Sep-ira

[oceanlovin'ea]

Employee of s corp has a SEP-IRA. Client asked if the employee can put money into the SEP.
I was under the impression that the s corp can contribute up to 25% of employees wages into SEP account. I know there is a dollar limitation on wages.
I didn't think the employee could make contributions to the SEP account in addition to what the corp puts in.

Okay I found in TTB page 13-6 that it must be entirely funded by employer.

Now employee did make the contribution. Can I make an entry on books that shows a loan from employee to corp for the $3000 that they put into SEP account? Then this year the corp can pay back the loan and in the future the contribution must come from corporate bank account.

Linda

[Uncle Sam]

Sep-ira

If the employee contributed to the SEP when he/she shouldn't have - what does that have to do with the corporation?
The SEP-IRA custodian should refund the amount to the employee, and identify it as a refund of an excess contribution - where a 1099-R should be issued and the code for it (which I DON'T remember right now) should be shown in Box 7.

[oceanlovin'ea]

The custodian (Raymond James) should not have taken a contribution from an employee, I wouldn't think. They should know better.

Linda

[ChEAr$]

clarifications

Employee of s corp has a SEP-IRA. Client asked if the employee can put money into the SEP.
I was under the impression that the s corp can contribute up to 25% of employees wages into SEP account. I know there is a dollar limitation on wages.
I didn't think the employee could make contributions to the SEP account in addition to what the corp puts in.

Okay I found in TTB page 13-6 that it must be entirely funded by employer.

Now employee did make the contribution. Can I make an entry on books that shows a loan from employee to corp for the $3000 that they put into SEP account? Then this year the corp can pay back the loan and in the future the contribution must come from corporate bank account.

Linda

I'm going to relate your question to my own situation, since I am sole shareholder,
CEO, CFO, president, general manager, etc of my own S corporation.

First of all, I do not have a SEP established, however my corporation does. There the
difference. The SEP plan requires any participant to also have an IRA established into
which up to 25% of my salary can be contributed by the corporation should it so decide
to do so. So far, so good.

Then, IF I separately qualify for regular IRA contributions (I don't btw), I may also
contribute to that same IRA. So if I could, maximum contribution would be 25% of
salary by my corporation inTO the IRA plus 6,000 per year of my own money into the
same IRA.

BTW, since I can't make a contribution to a regular (tax deferred) IRA on my own, I can still
put the max of 6,000 into a ROTH IRA, which I do religiously.

Hope this helps.

[oceanlovin'ea]

Form 5498

On the 5498, the contribution is listed in box 8 which is SEP contributions. Box 1 is IRA contributions.
So it appears that it was processed as if the corporation made the contribution. BUT it didn't.

That is what has me confused. (Or maybe the time of the year has me confused)

Thanks for your input.

Linda

[S T]

Form 5498

Don't the boxes on form 5498 issued by institutions, only have to do with how that institution has it earmarked in their system, not who actually make the contribution?

Form 5498 is merely issuing the required statement for the contributions for the year?

Sandy