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Independent Contractors and SEP-IRA

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

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Reply to
kastnna
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A Real Estate broker is a Statutory Non-Employee -- an independent contractor and cannot be an employee. I can't answer the isue of "employer" contributions -- I believe this is just additional 1099-Misc income to the broker that the real estate company has agreed to pony up. The real estate broker usually funds the SEP IRA weith up to

20% of Net Schedule C profit less statutory items, such as 1/2 SE taxc and SE Page 1 medical deduction. Example: Sch C Net Profit = 50,000 1/2 SE = 3,825

SE Health Ins = 6,175

Allowable SEP Contrib = 8.000

Calculation 20% x ( 50,000 - [3825 + 6175] ) = 8,000

__ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Reply to
Arthur Kamlet

A Real Estate broker is a Statutory Non-Employee -- an independent contractor and cannot be an employee. I can't answer the isue of "employer" contributions -- I believe this is just additional 1099-Misc income to the broker that the real estate company has agreed to pony up. The real estate broker usually funds the SEP IRA weith up to

20% of Net Schedule C profit less statutory items, such as 1/2 SE taxc and SE Page 1 medical deduction. Example: Sch C Net Profit = 50,000 1/2 SE = 3,825

SE Health Ins = 6,175

Allowable SEP Contrib = 8.000

Calculation 20% x ( 50,000 - [3825 + 6175] ) = 8,000

__ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Reply to
Arthur Kamlet

Thanks for the help

Reply to
kastnna

If her name is on their card, she could be held responsible for their conduct. So she should have insurance to protect her against that.

Ok. But real estate sales people are required to be supervised by brokers, so are statutory employees. I have a vague recollection of their being an exemption from the requirement of employee status for some outside sales people. Does it exist and does it apply to real estate agents who are not brokers? Stu

Reply to
Stuart A. Bronstein

(snipped

A broker is the guy who owns the store, so naturally he's in business for himself, be it proprietor, LLC, C, S, partnership. Salespeople are independent contractors

It does indeed. All real estate salespeople are statutory employees and file schedule c and get 1099's. One broker thought that all his employees were so treated, even his secretary. NOT

ChEAr$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

C'mon Harlan, you couldn't really mean that?

A real estate broker is a statutory Non-Employee who gets a

1099 and files a Sch C. A full-time life insurance salesperson is likely to be a Statutory Employee. A Statutory Employee gets a W-2 and files a Schedule C. __ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Reply to
Arthur Kamlet

It seems to me that Harlan is right. The sales person is a common law employee at least (and perhaps a statutory employee, depending on the statute), but by statute is treated for tax purposes as an independent contractor. Stu

Reply to
Stuart A. Bronstein

Arthur Kamlet wrote: I had written:

Don't mean what? I was talking only about how one broker treated his secretary the same as his sales people, and gave her a 1099-misc end of year. Ah, the bit about being "statutory employees". strike that wording.

Down hear the broker owns the company and as such files according to his organization. If incorporated, he gets a salary.

Reply to
Harlan Lunsford

Hmmm, where did I screw that up? Anyway, Stu, real estate sales people are never employees, and accordingly get

1099'misc end of year taking whatever expenses they have and paying SE tax. Those working for the broker like secretary, bookkeeper, janitor... whever, ARE common law employees and get W2 forms. the owner however files whichever return appropriate for his situation, sch c, 1065, 1120, 1120s... And if incorporated, even he can be an employee (and better be, if sub s corporation.) Santa ChEAr$, Harlan Lunsford, EA n LA
Reply to
Harlan Lunsford

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