Cpa

[Unregistered Skate1968]

Hello all,

OldJack recommended this site to me while on SamllBusiness forums.

A SEP and an traditional IRA

How does participation in a SEP affect one’s IRA contributions? Is the SEP considered a ‘retirement plan’ offered by an employer? I would imagine that IRA contributions would be subject to the same limitations as one who has a 401K through an employer.

Am I correct?

Thanks in advance.

Also, how do i register to get a username on this site?

[Bees Knees]

Welcome to the board.

TheTaxBook, page 13-13, under the heading "Active Participant in an Employer Sponsored Pension Plan," it lists a SEP as being an employer sponsored pension plan for purposes of the active participation rules.

To register, there is a register button up along the black bar.

[OldJack]

Welcome Skate, yes you are correct, the SEP-IRA is an employer (including a self-employed as an employer) contribution plan and you would have the same regular/traditional IRA deduction limitations you would with any employer retirement plan. Its been so long since I registered I don't remember. Someone else will tell you.

[Skate1968 -- Unregistered]

Cpa

Fast answers. Thanks to both of you.

I don't miss old job. But I do miss being able to talk to other accountants. It seems like this place could help me out a lot.

[Snaggletoof]

RollerBlade

Skate - welcome to the board. We are collectively the summum bonum of tax message boards, and we are gathering refugees from other tax boards every day.

Stick around and post often. We can be serious, authoritative, and fun. If we can put up with Old Jack, we can put up with anyone...

Ron Jordan, Manchester, TN

[OldJack]

If we can put up with Old Jack, we can put up with anyone...

Ahhhh shoot snaggletoot... you are tooooooo nice.

[Rlmea]

SEP & SIMPLE

Along this same line, would an individual who participates in a SIMPLE Plan through an employer (W-2 income) also be able to contribute to a SEP plan with self-employment (SCH C) income in the same year?

[Snaggletoof]

Yes, but

I think the answer is "yes" - a taxpayer can thus actually have two different SEPs, but there might be a limit upon a total amount a taxpayer may defer. (I hope I'm right about this, I did it on myself a couple years)

There ARE limits to begin with - there is a limit on the W-2 under the SIMPLE, and also a separate limit under a conventional self-employed SEP and each of these must be observed. However, I'm not sure if there is an aggregate limit for a grand total maximum deferral (or contribution for that matter).

Maybe the much-maligned Old Jack can help us with that one. If not, I'm sure the omnipresent and omniscient Bees Knees can refer us to something...

[Bees Knees]

The employer with the SIMPLE cannot have another plan, but there is no restriction on the employee of the employer with a SIMPLE having another plan through another job (or self-employed).

As to the aggregation thing, you only aggregate plan limitations if the different employers are related. For example, a taxpayer that is both self employed in one business, and a shareholder of a corporation in another business, would have to aggregate both plans for purposes of the limitation rules. Also, elective deferrals from all plans of an employee are aggregated, even if the different employers are not related.

[Rlmea]

Yes, but

Thank you both. I am aware of the maximum of the SIMPLE ($10,000/yr and $12,500 if age 50 or older) and the calculation to obtain the SEP contribution based on net s/e income less the 50% s/e tax. I assume you are referring to the aggregate plan limitations..... that the combination both deferrals can not exceed $42,000 or thereabout?

[OldJack]

Maybe the much-maligned Old Jack can help us with that one. If not, I'm sure the omnipresent and omniscient Bees Knees can refer us to something...

I strongly "DISAGREE" with the much-maligned statement but I agree with you and bees postings on the subject.

[OldJack]

that the combination both deferrals can not exceed $42,000 or thereabout?

Each employer, the W2 (if not related) and the self-employed employee has their own $42,000 limit or whatever the limit is for that type of retirement plan. Did I say that clear or is it still confusing?