SEP IRA


P

Peter

On my W-2 box 13 states that I have a retirement plan. My
company setup an SEP for me and I'm wondering if I can
contribute to it. Turbotax is only allowing me to contribute
$1545 towards my schedule c but I also have a larger income
from my W-2. This is the first year I received a 1099-MISC
and probably the last year. I would like to contribute more
money but have it deduct some money from what I owe the irs.
I tried putting in numbers into the IRA form just to see
what would happen and it said I could take $4000 but it
would be a nondeductible contribution. I guess if its
nondeductible I would be better off with a ROTH IRA. What
should I do?

Thanks,
Pete
 
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P

Phil Marti

Peter said:
On my W-2 box 13 states that I have a retirement plan. My
company setup an SEP for me and I'm wondering if I can
contribute to it.
No. Only employers can make SEP contributions based on W-2 wages.
Turbotax is only allowing me to contribute
$1545 towards my schedule c but I also have a larger income
from my W-2.
For the Schedule C income you wear both the employer and
employee hats for SEP purposes. That's why you can make a
SEP contribution based on the Schedule C income.
This is the first year I received a 1099-MISC
and probably the last year. I would like to contribute more
money but have it deduct some money from what I owe the irs.
I tried putting in numbers into the IRA form just to see
what would happen and it said I could take $4000 but it
would be a nondeductible contribution. I guess if its
nondeductible I would be better off with a ROTH IRA.
Absolutely. A Roth instead of a nondeductible traditional
is one of the few no-brainers in tax law.
 
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B

brownie

Peter said:
On my W-2 box 13 states that I have a retirement plan. My
company setup an SEP for me and I'm wondering if I can
contribute to it. Turbotax is only allowing me to contribute
$1545 towards my schedule c but I also have a larger income
from my W-2. This is the first year I received a 1099-MISC
and probably the last year. I would like to contribute more
money but have it deduct some money from what I owe the irs.
I tried putting in numbers into the IRA form just to see
what would happen and it said I could take $4000 but it
would be a nondeductible contribution. I guess if its
nondeductible I would be better off with a ROTH IRA. What
should I do?
For the company SEP, only the company can make contributions
to the plan and the amount contributed is fixed by the plan.
If you also set up a SEP-IRA as a self-employed individual,
contributions are limited by your SE income. If you get no
tax benefit today from a traditional IRA, the ROTH IRA is
more advantageous (Tax free is better than tax deferred).
 
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