SEP IRA, Double Check

[geekgirldany]

I have a customer that wants to start a retirement plan that is deductible at the S-Coporation level. S-Corporation has been opened for two years. I recommended a SEP and it appears that is what he is going for. I told him to have the S-Corporation contribute $3785. 25% of $15140 wage. This will be deductible for 2005.

I just want to make sure that I am thinking this through correctly and it would be the best option for him.

[Unregistered]

depends on how much he wants to contribute

if he wants to contribute more he could set up a SIMPLE, defer $10,000 (12k if over 50) plus the company would pay in 3% of his salary. All of this would be deductible at the corporate level, and would allow for a larger retirement contribution. however, you can't retroactively set one up for 2005. you must set up a plan for 2006 by 10/1

[geekgirldany]

Yeah that Simple plan is what made me rethink the SEP. I saw the $10,000 and that he could contribute more that way. But now this is not retroactive for 2005 correct? So he can't set one up now and it be counted towards 2005 correct?

EDIT:
Found it in the tax book page 13-17. Has to be setup like you said before October 1 of the year the contribution is to apply. But after that the taxpayer has until the due date to make contributions.

[veritas]

It is to late for 2005.

[geekgirldany]

thank you. I think a simple might be more of the way he wants to go because he wants to contribute as much as he can. He doesn't need the deduction this year that much. So I think doing it for 2006 is a better idea and not doing a SEP.

[veritas]

What area are you in. Maybe one of our motley crew is in your area and can setup the simple?

[JoshinNC]

What state are you in geekgirl?

I am registered to sell securities in NC only, but can find you a reputable broker near you to help set up the plan.

[geekgirldany]

I am in Northeast Georgia. Customer talked like he will probably go with his banker on this. That's just because I don't know of anyone to recommend him to though.

Thank you

[JoshinNC]

Edward Jones

they do a great job and most brokers have a buy and hold mentality. not a lot of churning going on in accounts just to create commissions.