Great than 2% SH - Considered SE for SEP?

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    #1

    Great than 2% SH - Considered SE for SEP?

    If a taxpayer is a greater than 2% shareholder in an S Corp. are they considered self employed for purposes of SEP contribtuions? I thought they were allowed up to 25% of W2 wages, but someone told me that they were considered self employed and allowed 20% of earnings. Who is correct?
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    • JON
      Senior Member
      • Jul 2005
      • 1265
      #2
      Someone

      was wrong...............

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        • Bees Knees
          Senior Member
          • May 2005
          • 5456
          #3
          The greater than 2% S corp shareholder is NOT considered self employed. A SEP would have to be set up through the S corp and the contributions are based on 25% of W-2 wages. You can't use K-1 line 1 profits for a SEP contribution.

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