1120S 100% Shareholder SEP Contribution

[wizbang30]

I am trying to work through the Deduction Worksheet for Self-Employed on Page 21 of Publication 560, on Step 1 it doesn't have "net profit" for an 1120S, since we filed the 2553 for a disregarded entity, does he default into the Schedule C definition of "net income" and then report the contribution like a partnership through the K-1 of the 1120S.

Of course the client forgot to inform me of this contribution when I prepared the 1120S and his 1040.

Any help would be appreciated......

[JohnH]

If he's operating an S corp, then his allowable SEP contribution is calculated based on his salary, not the S-corp net profit.

[Roland Slugg]

Disregarded entity?

Also, if S Corp status has been elected, that's not a "disregarded entity." A disregarded entity is a SMLLC whose owner has not chosen to be taxed as a corporation.

[Uncle Sam]

1120s Sep

How can a client NOT inform you of a SEP contribution?
Wouldn't you come across this when preparing the 1120S and reconciling the net income for year to the AAA account?
A SEP is strictly an EMPLOYER expense - not an employee deferral.

[wizbang30]

More to the Story

The client was actually a 51% owner in a partnership which dissolved as of 6/1/07 (which a lawsuit is involved) then we elected to be taxed as an S-Corp as an SMLLC. Based on the fact that the SEP was used with the same EIN number can't I combine the deduction for the P'ship and the S-Corp? The client did not inform me of the SEP until after the tax returns had been filed and the contribution was made, even though I asked about it, probably to try and keep the other partner out of it? So the 1065 & his 1040 will need to be amended?

Thanks for the insight......I should probably withdraw from the engagement?

[ChEAr$]

If I'm reading this right,

The client was actually a 51% owner in a partnership which dissolved as of 6/1/07 (which a lawsuit is involved) then we elected to be taxed as an S-Corp as an SMLLC. Based on the fact that the SEP was used with the same EIN number can't I combine the deduction for the P'ship and the S-Corp? The client did not inform me of the SEP until after the tax returns had been filed and the contribution was made, even though I asked about it, probably to try and keep the other partner out of it? So the 1065 & his 1040 will need to be amended?

Thanks for the insight......I should probably withdraw from the engagement?

The dissolved partnership is the entity which had the SEP/IRA in place, right?
Remember, the next business entity, the LLC being taxed as an S corp, must have established
it's OWN SEP/IRA (with new tax number, goes without saying), and then any contribution would
be from the corporation based on the salary of your client.

Can of worms.
good luck!