SEP IRA

Mar 15, 2007 2 Replies
P

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

No. Only employers can make SEP contributions based on W-2 wages.

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.

Absolutely. A Roth instead of a nondeductible traditional is one of the few no-brainers in tax law.

-- Phil Marti Clarksburg, MD

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B

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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