S-Corp/SEP IRA question


M

Miss Livvy

I was self-employed for the majority of 2004, but towards
the end of the year I incorporated. My question is, can I
still contribute to a SEP IRA under the S-Corp? I am
confused because technically I've become an "employee" of my
own corporation. If I can contribute to the SEP-IRA, who
makes the contribution, the corporation, or me?

TIA
 
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T

Thomas Healy

Miss Livvy said:
I was self-employed for the majority of 2004, but towards
the end of the year I incorporated. My question is, can I
still contribute to a SEP IRA under the S-Corp? I am
confused because technically I've become an "employee" of my
own corporation. If I can contribute to the SEP-IRA, who
makes the contribution, the corporation, or me?
Not only are you technically an employee; you are actually
an employee. The corporation makes the contribution, based
on the salary it paid you in 2004.
 
H

Harlan Lunsford

Miss said:
I was self-employed for the majority of 2004, but towards
the end of the year I incorporated. My question is, can I
still contribute to a SEP IRA under the S-Corp? I am
confused because technically I've become an "employee" of my
own corporation. If I can contribute to the SEP-IRA, who
makes the contribution, the corporation, or me?
If before the incorporation you were maintaining a SEP/IRA,
then you may contribute based on your proprietorship
profits.

However, after that date, the corporation must establish
it's own SEP , and that must have been done before 12/31 to
qualify. So, this year, have the corporation do so, and it
may then contribute up to 25% of your salary to that plan.

Notice I said "of your salary", meaning you are an employee,
and therefore get paid a reasonable salary and get a W2 at
year's end; which you probably already know.

ChEAr$,
Harlan Lunsford, EA n LA
Mon 7 Feb 2005
 
T

Thomas Healy

Harlan Lunsford said:
Miss Livvy wrote:
If before the incorporation you were maintaining a SEP/IRA,
then you may contribute based on your proprietorship
profits.

However, after that date, the corporation must establish
it's own SEP , and that must have been done before 12/31 to
qualify. So, this year, have the corporation do so, and it
may then contribute up to 25% of your salary to that plan.
Harlan, the SEP can be established as late as the due date
of the return, including extensions. It's only qualified
plans that need to be established before the end of the
corporation's fiscal year. But I think you knew that;
probably a "senior moment."
 
H

Harlan Lunsford

Harlan, the SEP can be established as late as the due date
of the return, including extensions. It's only qualified
plans that need to be established before the end of the
corporation's fiscal year. But I think you knew that;
probably a "senior moment."
Well, that COULD be of course. I was trying to remember
when I looked it up prior to establishing my own Sub S SEP
plan way back in 1993. I could swear that what I found
then said that for proprietorship and partnerships it could
be established as late as 4/15, sure. But for a corporate
plan, it had to be established before 12/31 (all assuming
calendar year of course.).

So then, I'll put this on my "to do:" list after April
15th! (grin

ChEAr$,
Harlan Lunsford, EA n LA
Thu 10 Feb 2005
 
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H

Harlan Lunsford

Well, that COULD be of course. I was trying to remember
when I looked it up prior to establishing my own Sub S SEP
plan way back in 1993. I could swear that what I found
then said that for proprietorship and partnerships it could
be established as late as 4/15, sure. But for a corporate
plan, it had to be established before 12/31 (all assuming
calendar year of course.).

So then, I'll put this on my "to do:" list after April
15th! (grin
However, since I just happened to have publication 560 at
hand today while looking up something else, there it is.
A corporate SEP must be established by 1120(s) due date plus
extensions. which usually means March 15th for most.

ChEAr$,
Harlan Lunsford, EA n LA
 
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