Business & farm

Yes, I can give you some background!  You also need to remember if you are providing services to your S-Corp you need to be paying yourself a reasonable compensation amount and your deduction should be limited by your W-2 income from the business.

Per the IRS:

Simplified Employee Pension (SEP) plans can provide a significant source of income at retirement by allowing employers to set aside money in retirement accounts for themselves and their employees. A SEP does not have the start-up and operating costs of a conventional retirement plan and allows for a contribution of up to 25 percent of each employee's pay.

• Available to any size business
• Easily established by adopting Form 5305-SEPPDF, a SEP prototype or an individually designed plan document
  • If Form 5305-SEP is used, cannot have any other retirement plan (except another SEP)
• No filing requirement for the employer
• Only the employer contributes - (This is your S-Corp even if you do not pull a salary from the business)
  • To traditional IRAs (SEP-IRAs) set up for each eligible employee
  • Employee is always 100% vested in (or, has ownership of) all SEP-IRA money

Since you are receiving a Schedule K-1 from your S-Corp, you will not see the contribution on your K-1 nor will you enter any amount on your individual tax returns.  Below is the information you need to calculate the amount the business can contribute to the SEP IRA.

Per the FAQ link I provided:

How much can I contribute to my SEP?

The contributions you make to each employee's SEP-IRA each year cannot exceed the lesser of:

1. 25% of compensation, or
2. $66,000 for 2023 ($61,000 for 2022; $58,000 for 2021; $57,000 for 2020 and subject to annual cost-of-living adjustments for later years).

These limits apply to contributions you make for your employees to all defined contribution plans, which includes SEPs. Compensation up to $330,000 in 2023 ($305,000 in 2022; $290,000 in 2021; $285,000 in 2020 and subject to cost-of-living adjustments for later years) of an employee's compensation may be considered. If you're self-employed, use a special calculation to determine contributions for yourself.

Contributions must be made in cash; you cannot contribute property.

If you've contributed more than the annual limits to your SEP plan, find out how to correct this mistake.

How much can I contribute if I'm self-employed?

The same limits on contributions made to employees' SEP-IRAs also apply to contributions if you are self-employed. However, special rules apply when figuring the maximum deductible contribution. See Publication 560 for details on determining the contribution amount.

@cstalker