Suppose you do you 2007 tax return and find that you can contribute
10k into your SEP. Then you amend your return and take more business deductions, so your maximum SEP contribution is 9k. It looks like you save on federal taxes, like $250 if in the 25% tax bracket, but you have to take 1k out of your SEP IRA and pay $350 tax on it (25% tax plus 10% penalty), and maybe even tax on the earnings of the 1k.
Would it be possible to recharacterize some of the contribution as a
2008 contribution?
This seems possible per section 404(a)(1)(E).
(E) Carryover Any amount paid in a taxable year in excess of the amount deductible in such year under the foregoing limitations shall be deductible in the succeeding taxable years in order of time to the extent of the difference between the amount paid and deductible in each such succeeding year and the maximum amount deductible for such year under the foregoing limitations.
So what forms does one use to reflect this carryover?
And suppose you to withdraw the excess amount (and pay the 10% penalty), then on which form/line do you report the excess amount, and I guess the penalty is on form 5329.
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