SEP Contribution Timing

[equinecpa]

A self-employed schedule C taxpayer filed an extension, and is making a SEP contribution by the deadline 10/15/10. They had one employee, their spouse whom they paid a small wage of $1000. Can they fund both their SEP's now? And would the SEP be reported on the spouses W-2 in 2010 or should the 2009 W-2 be amended? What is the correct way to report Employee SEP contributions made after the fact?

I should mention maintaining the same contribution ratio as used for the proprietor, the spouses SEP contribution will only be about $38.00.

[Gene V]

A self-employed schedule C taxpayer filed an extension, and is making a SEP contribution by the deadline 10/15/10. They had one employee, their spouse whom they paid a small wage of $1000. Can they fund both their SEP's now? And would the SEP be reported on the spouses W-2 in 2010 or should the 2009 W-2 be amended? What is the correct way to report Employee SEP contributions made after the fact?

I should mention maintaining the same contribution ratio as used for the proprietor, the spouses SEP contribution will only be about $38.00.

According to IRC 404(h)(1)(B), To take a deduction for contributions for a particular year, the contributions made for that year must be made by the due date (including extensions) of the employer's income tax return for that year.
(I imagine that holds true for their employees.)

Form W-2. The way I understand--Employer contributions to a SEP are not included in an employee's wages and are exempt from FICA, FUTA and federal income tax with-
holding. SEP participants are considered active participants in an employer-provide pension plan. Thus, their employer should check the "retirement plan" box on their W-2.

[equinecpa]

So how would you handle this? The return is on extension (and since MFJ) so are the employees....so the employees W-2 - is the contribution reflected on the year it is made ie 2010 or should it be on the 2009 W-2?

[Gene V]

I would say it goes on 2009 W-2's---only thing you would have to amend on the W-2 would be box 13 (check retirement plan), since its your spouse w-2, I probably do nothing this year with it, unless it's going to effect some other retirement plans that you might have.

See Pub. 560.
Reporting on Form W-2 Do not include SEP contribution on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). page 6