My Retirement

[Super Mom]

This Is For My Taxes--(i Chip Away At It Between Everyone Else's) I Was Reading In The Taxbook On Planning And It Referred Me To The Retirement Tab For A Sep Ira Being A Possible Benefit For Me. I Have A Very Small Amount I Put In Ira's, And Did't Think A Sep Was An Issue For Me. But Today I'm Thinking, If I Can Deduct It From My Sched. C And Not Pay Se Tax On It, That Would Be A Benefit. I Also Don't Know-- Is That Something You Can Just Go To A Bank And Get (i Prefer Fdic Insured)?? Anyone Have Any Advice? Also, I Have No Employee's It's Just Me, I Don't Think That Matters Though?!

[BP.]

Did't Think A Sep Was An Issue For Me. But Today I'm Thinking, If I Can Deduct It From My Sched. C And Not Pay Se Tax On It

SE SEP not a sched C deduction - adjust on 1040 p. 1, l. 28.

[Super Mom]

Nevermind!

Yes, I Found That About The Time I Saw Your Response!! Oh Well, I Tried!
Thanks For Your Time!!!!!

[ChEAr$]

Compare however the SEP IRA with regular old IRA.

Since SEP contribution by employer is limited to 25% of earnings, might be better to
make regular IRA contribution for the full $ 5,000 / 6,000.
Example, salary from S corp is only 16,000$ so corporation is limited to SEP contribution of $4000. Better off to make a regular $ 6,000 for certain individuals.

[JohnH]

Harlan:
One additional twist to this if it's an S-corp. In the example you cite, wouldn't it be better to make a $4,000 SEP contribution and then $2,000 into an IRA (unless other income on the return precludes the IRA contribution)? I say this because the SEP contribution via the S-corp bypasses SocSec/Med tax, thus saving about $600 total between the corp and the employee/shareholder.

[ChEAr$]

Harlan:
One additional twist to this if it's an S-corp. In the example you cite, wouldn't it be better to make a $4,000 SEP contribution and then $2,000 into an IRA (unless other income on the return precludes the IRA contribution)? I say this because the SEP contribution via the S-corp bypasses SocSec/Med tax, thus saving about $600 total between the corp and the employee/shareholder.

Excellent catch, John! And to think that you had this flash of genius during the busy
part of tax season. (grin

I had a tiring day; how about you?

[JohnH]

Yes, very busy around here, and I keep reminding myself to be thankful. One huge reminder comes every time I'm processing those returns with unemployment compensation to report.

Actually, don't give me too much credit. It just happened that I'd been discussing this SEP IRA situation with a client earlier and it was fresh on my mind. Funny how often serendipity comes into play...