How to designate Self-employed SEP contributions to correct year on tax forms

[antoninaone]

I'm self employed, and for 2022 year ending on 31 Dec, 2022 I had not contributed the maximized amount to my SEP. I'd like to maximize the allowed contribution but my SEP custodian is saying that what I contribute in 2023 will be marked on my 5498 form as being a 2023 contribution, not a 2022 contribution. However, they can mark it on my *statement* as being a 2022 contribution. They've said I need to designate the funds correctly on my tax forms. Does anyone know how I can do this? Is there a form available on the desktop version of turbotax where I can designate the year of my contribution?

Also, Last year, I did the same but did not know I had to do something with my tax forms—I thought the custodian marking it on the statement as being a previous year contribution was enough. I'm now concerned that the contribution I made in April 2022 to maximize my 2021 contribution has put me over the allowed amount for 2022. So, the issue here is the same -- how do I designate the correct tax year (ie previous tax year of 2021 for a contribution made in April of 2022)? 

Any help would be much appreciated.

[AliciaP1]

If you input your SEP contribution on your 2021 tax return, it is designated correctly for your taxes.  If you did not include it on your tax return, you will want to amend your 2021 return because it is an allowable deduction of up to 25% of your self-employment income less 1/2 of your self-employment tax.

To maximize your SEP contribution and enter the deduction for 2022 you can follow these steps in TurboTax Online:

1. Within your tax return, click on Wages & Income in the black menu bar on the left
2. Scroll down to Other Business Situations and click Show more
3. Click Start for Self-employment Retirement Plans
4. Answer the questions about individual 401(k) plans and answer Yes on the Keogh, SEP, and SIMPLE Contributions screen
5. Click the Maximize box for SEP and Continue
6. If you want to reduce the amount of income the deduction is calculated on you can adjust that on this screen, if not leave it blank and Continue
7. The Your Retirement Contributions screen tells you the amount to contribute before 4/18/23 (for 2022 tax returns)

[antoninaone]

Thank you.

Just to make sure that I'm understanding your answer -- are you saying that as long as I put the correct amount (maximized for that year) into the SEP contribution box on my taxes for that year, as long as the funds are contributed prior to tax day in April of that year they will be designated as prior year? And, I do not need to fill out a separate form to submit, correct?

[AliciaP1]

Correct, you do not need to file something extra with the IRS or your state for tax purposes.  You still need to ensure that your contribution is identified as a prior year contribution within the SEP plan.  So, when you made the contribution in April 2022, you needed to have identified to your custodian that the contribution was for 2021.  You need to do the same this year and identify the amount as a 2022 contribution to your custodian.

@antoninaone 

[antoninaone]

OK. That leads back to my main question which is - do you happen to know if I need to make that designation on a separate form?

My SEP custodian has told me that any contribution I make in 2023 will be on their 5498 for 2023, NOT for 2022, and they cannot designate a contribution made in 2023 for 2022 -- it will show up on the 5498 form as being a contribution on the date it was invested.

However, they can mark it on my monthly statements from them as designated for prior year 2022. They suggested I create a W2 form for my SEP contributions, making sure to designate both the contributions made before 12/31/22, and the specific ones I made in April 2023 to maximize my SEP contributions, on a self-created W2 form as 2022 contributions.

I'm not sure if they are correct, or if I can / how to create a W2 form for SEP contributions in my desktop version of turbotax.

Hope this is all making sense, and thank you for your time.

[AliciaP1 · Accepted solution]

Yes, it makes sense, but you have answered your own question.  You have been told they will mark on your account (via your monthly statements) that the contribution is for the prior year (2022 this year).  That's what you need.  

Then file your taxes with the same amount contributed for the correct tax year and everything will match up.  There is nothing else you need to do.

@antoninaone 

[antoninaone]

Great.

Thank you!