I have a new client and I am transferring her SEP-IRA account over to our broker-dealer from her previous one. I am not sure the original SEP was established correctly and I would appreciate your opinions.
The client (Jane Doe) owns a real estate agency (ABC real estate) with no employees. She does, however, have licensed real estate agents claiming to be independent contractors working out of her office. She gets a commission based on the properties they sell, but the agents work solely on commission. The agents have business cards and other company related material with their names on it, but I don't know if that effects anything.
The SEP plan is setup as "Jane Doe SEP-IRA". I am accustomed to seeing the plan setup as "ABC real estate SEP-IRA" and the Client's individual account to be "ABC real estate SEP-IRA fbo Jane Doe" but this does not appear to be the case. She makes no employee contribs but ABC makes an non-elective employer contrib to her account.
Because the other agents are "independent contractors" she claims they are not eligible employees. Being so, they are obviously not entitled to any non-elective employer contributions.
Are there any problems with the agents claiming independent contractor status? Also does she completely wipe her hands of their tax reporting and withholding if they are ICs? Lastly, does the plan need to be refiled so that the ABC is the plan sponsor and Jane is the sole plan participant.
Please point out any oversights I have made that will cause Jane future trouble. I am trying to fix this in the transfer stages rather than having to go back later. Thanks