SEP IRA and Partnership

[S T]

Sorry - I should probably know this answer, but I am totally brain-fried!
Have a profitable Partnership that through K-1's will pass through a lot of income

Can the individual partners contribute to a SEP Ira on their own and not via the Partnership.

Both partner's will be disqualified from an IRA distribution due to either a spouse on retirement plan, or the other partner is on a 401K plan

Hoping a SEP IRA will work for them? Would it be in the Partnership Name, or can we do in each Partner's Individual Name as their own account

Thanks

Sandy

[S T]

Don't know options at this point

No to answer my own question, the partner can not set up a SEP IRA, the partnership has to

Don't know how that is going to quite work at this late date for year 2013

Anyone familiar with this and what are my options to present?

Thanks

Sandy

[JohnH]

If an extension of time to file was submitted for the partnership, then a SEP iRA can still be set up through the partnership. Otherwise, they are limited to the IRA with all its restrictions.

[equinecpa]

Bit of an old thread here but I"m a bit confused with the same issue. I have a partnership and partners on extension for 2013.

One of the partners is considering a SEP contribution, can she set up an individual SEP IRA and contribute to it based on her SE earnings from the partnership? I'm thinking yet but would hate to advise wrong!

[abby]

SEP rules learned the hard way

Just like an employer must treat all employees equally when making contributions to their SEPs (except for the small list of exceptions), a partnership or LLC must do the same, based on the self-employment earnings of the partners/members. Passed through on the K-1 to be taken on the individual return.

There are some nuances to how the deduction is reported, but this is the main point.

I learned this the hard way, by making this mistake myself many years ago. The instruction to treat these SEPs the same as a self-employed individual seems to indicate each partner can make their own decision, but further down in the rules it does say the plan must be out of the partnership/LLC, and follow the equal treatment rules.

[Roland Slugg]

I have a partnership and partners on extension for 2013. One of the partners is considering a SEP contribution. Can she set up an individual SEP IRA and contribute to it based on her SE earnings from the partnership?

No. As others have already correctly said, a SEP must be established by the employer ... the partnership in this case ... and it must cover all employees, both partners and non-partners alike, in accordance with the usual rules for retirement plans generally.

A partner can contribute to his own IRA (or Roth IRA), based on the IRA rules and limitations, and income from a partnership qualifies as "earned income" as long as it is "self-employment income." Of course the IRA deadline for year 2013 contributions has already passed, so the issue is now moot for that year.