Sep & Ira

[oceanlovin'ea]

S corp owner/shareholder has SEP-IRA plan. If the corporation contributes to his SEP account the allowed 25% of his salary for 2008, can he still make an individual contribution to the IRA account?

That would mean the corporation could put up to $7000 in his SEP-IRA account and he could contribute up to $5000 in the IRA also.

Is that correct?

Linda

[JohnH]

He can contribute to an IRA, but his contribution may be limited or eliminated depending upon his total income. This is because the SEP causes him to be considered as being covered by a retirement plan at work.

[oceanlovin'ea]

That is what happened. Wife makes a lot of money so their AGI was too high. It becomes a non-deductible contribution.

He put $3000 in IRA account during 2008 and the investment company called it a SEP contribution but the contribution came from his personal account not the corporate account.
I don't beleive there is any way to adjust bookkeeping to show contribution as coming from s corp when he actually paid it himself.
So it becomes a non-deductible contribution.

Linda

[JohnH]

If the corp is on extension, it has until the extended due date to make a SEP contribution for him and still take the deduction on the 2008 form 1120S. The really nice thing about SEP contributions through the corp is that the money used to fund the SEP is not subject to payroll taxes.