SEP IRA


S

Sandy Jones

During this year, I made some money (mostly commissions from
companies) and I recieved a 1099-MISC form with about $100k
in income. Now I want to open a SEP for myself. Is this
possible? I heard I have to give myself wages (W2 form) in
order to do this. But I am the only person in my business
and I hire no one else. Any advice would be appreciated.

Thank you.
 
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J

John H. Fisher

During this year, I made some money (mostly commissions from
companies) and I recieved a 1099-MISC form with about $100k
in income. Now I want to open a SEP for myself. Is this
possible? I heard I have to give myself wages (W2 form) in
order to do this. But I am the only person in my business
and I hire no one else. Any advice would be appreciated.
For SEP and qualified plans, net earnings from
self-employment is your gross income from your trade or
business (provided your personal services are a material
income-producing factor) minus allowable business
deductions. Allowable deductions include contributions to
SEP and qualified plans for common-law employees and the
deduction allowed for one-half of your self-employment tax.

For the deduction limits, earned income is net earnings for
personal services actually rendered to the business. You
take into account the income tax deduction for one-half of
self-employment tax and the deduction for contributions to
the plan made on your behalf when figuring net earnings.

You'll find much more about this, and other plans, at the following URL:

http://www.irs.gov/pub/irs-pdf/p560.pdf

More important, for the moment, is that you must report your
income and expense to be included on your tax return. You
DO NOT issue yourself a W-2.. Assuming you are a sole
proprietor, you'll be filing Schedule C (Form 1040) "Profit
or Loss from Business". You'll be figuring your
Self-Employment tax on Schedule SE. I'll give you the URL
for the Schedule C so that you may study the form. But I'd
strongly urge you to seek professional help in these
matters. The savings would likely be well worth your while.
Here's the URL:

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

Hope this helps 'n' Good Luck!!!-:)

"Jack" - John H. Fisher - (e-mail address removed)
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=:)
 
H

Harlan Lunsford

Sandy said:
During this year, I made some money (mostly commissions from
companies) and I recieved a 1099-MISC form with about $100k
in income. Now I want to open a SEP for myself. Is this
possible? I heard I have to give myself wages (W2 form) in
order to do this. But I am the only person in my business
and I hire no one else. Any advice would be appreciated.
If you conduct business as a proprietor (single owner) and
report results on schedule C with your 1040, no problem.
YOu may open the SEP-IRA before April 15th.

But with any other type of organization, e.g. corporation,
you DO have to have paid yourself wages during the year. I
assume you are referring to 2003, in which case it's too
late to pay yourself wages/salary. Plus the SEP-IRA would
have had to have been opened before the end of the year.

Happy New Cheer$,
Harlan Lunsford, EA n LA
and SEP-IRA owner
 
J

Jay

Sandy said:
During this year, I made some money (mostly commissions from
companies) and I recieved a 1099-MISC form with about $100k
in income. Now I want to open a SEP for myself. Is this
possible? I heard I have to give myself wages (W2 form) in
order to do this. But I am the only person in my business
and I hire no one else. Any advice would be appreciated.
A self-employed person can have a SEP.

I've never heard of any requirement for "wages" or a "W2."
If somebody told you this, I'd ask them for an explanation.

I've been self-employed like you, and have a SEP, and never
had to give myself wages. I fill out IRS Form 1040 and
Schedule C year after year, and never noticed any
requirement for wages.

SEPs are described in IRS publications 590 and 560, if you
want to look up the details.
 
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D

Drewremedy

During this year, I made some money (mostly commissions from
companies) and I recieved a 1099-MISC form with about $100k
in income. Now I want to open a SEP for myself. Is this
possible? I heard I have to give myself wages (W2 form) in
order to do this. But I am the only person in my business
and I hire no one else. Any advice would be appreciated.
If you pay yourself a wage or produce an earned income via
Sch C you are entitled to set up IRA or SEP IRA just the
same as anyone else--up thru the time you file your return
for 03.

Moreover, if you establish a plan by October (and you can
fund it later) you can set up a 1 person 401K plan thru say
" Fidelity" or some other major provider and set aside much
more than a SEP permits.

(You cannot do both a 401K and a SEP at the same time for
the same income stream)

Plan ahead for 2004?
 

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