You were misinformed by the first CPA.....and significantly over funded your SEP.
Your 2nd CPA is correct.
The pass-through income on your S Corp K-1 is not considered earned income, and as a result, only the income reflected on your W-2 is considered for the SEP contribution.
Now you need to fix the over funded plan and the 2nd CPA appears to be the individual to help in this matter.
Additionally, while you are meeting to fix this issue, you need to have a discussion with the new CPA on what would be considered "reasonable wage".
Based on the limited facts, if you were selected for audit by the IRS, I believe they would challenge the current wage to distribution ratio.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
