dmertz
Level 15

Retirement tax questions

It's somewhat pointless to ask how to report Roth SEP contribution if the SEP plan agreement doesn't allow for such a contribution.

 

Once plan agreements are amended to allow for Roth SEP contributions, IRS Notice 2024-02 suggests that the Roth SEP contribution would be taken as a deduction as if it was a traditional SEP contribution followed immediately by an entirely taxable Roth conversion reported on a Form 1099-R for the year in which the deposit into the designated Roth account is made.

 

Given the information in IRS Notice 2024-02 and because there is no limitation on making a Roth conversion from a SEP IRA, there is no reason not to make a traditional deductible SEP contribution and immediately convert it to Roth.  If one has basis in nondeductible traditional IRA contributions that would result in less than the full amount of the Roth conversion being taxable, this could even result in a better taxable outcome than a directly making a Roth SEP contribution.