SEP contribution Scorp

[Taxadvisor VA]

Client wants to loan money to the corporation to make the SEP contrbution by 3.15.13.
It sounds like a good strategy to me.

Any potential issues with doing it this way.

Thanks,

Taxadvisor VA

[JohnH]

No problem at all.
Just document the loan properly.

[Taxadvisor VA]

SEP contribution

This is what I thought but it is always nice to hear it from someone else.

Thanks so much,

Taxadvisor VA

[JohnH]

Another option would be to file an extension for the corp return. This gives the the client until Sept 15, 2013 to make the SEP contribution out of current year's earnings but still deduct it on last year's return.

The only problem with this approach is that it creates a bit of a "snowball" effect going forward. But it keeps the SEP window open while monitoring current year cash flow. If Sept 15 rolls around and there aren't sufficient earnings, there's still the option to loan the money to the corp, assuming the money isn't needed to fund current operations.