Prior year SEP contribution must be IN-HAND by April 15th (NOT POSTMARKED by 4-15) ??

Question

I have in front of me a check to Fidelity Investments for $2,750.00 dated April 15, 2010. On it, I have marked in three places that I intend for it to be a Tax-Year 2009 contribution. The representative at Fidelity told me to do that.

However, I have come to learn that it can NOT (no matter what I wrote) be considered a Tax Year 2009 because SEP contributions (unlike other things) must be received (IN-HAND) by 4-15 (not postmarked by).

Why this is a big deal?

It invalidates my 2009 return ? I took an illegal deduction. MORE IMPORTANTLY:
I want to open a Self-Employed-401K next week. This is not allowed if I?ve already contributed to my Tax-Year 2010 SEP. I would appreciate your comments. Thank you.

Arthur Kamlet · Accepted Answer

I thought SEP payments had to be completed by the due date asextended?

Alan · Answer

I think the issue here is that 4/15/10 was the due date as there was no request for an extension. As such, the contribution had to be made by

4/15/10. It is not like the rule used for timely filing where you can use the day you mailed your tax return. If the check arrived at the trustee after 4/15/10, it can not be a 2009 contribution.

Phil Marti · Answer

OP says that Fidelity is saying he can't make this particular contribution after 4/15/2010. How would Fidelity know whether OP filed for an extension or not? I suspect the problem is that Fidelity is processing it as a traditional IRA contribution, not a SEP. Why they're doing that is an issue between OP and Fidelity, e.g., was it not marked as a SEP?

As for whether you can make a post-April 15 SEP contribution if you didn't get an extension on the 1040, would reg 301.9100-2 give you relief? It's cited for other types of things, such as recharacterizations, that can be done through 10/15 even if you filed without an extension.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Prior year SEP contribution must be IN-HAND by April 15th (NOT POSTMARKED by 4-15) ??

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