IRS Pub states that you can carry any excess SEP contribution to the following tax year but it cannot exceed the contribution limit for the later year. I think (but am not sure) if you can withdraw the amount that exceeds the later year limit before the filing due date for that later year you will only pay tax on the amount of income the excess earned as income in later year.
Example: contributed $5000 to SEP in March 2017 for tax year 2016 and erroneously contributed $5000 again in Oct 2017. You can claim the second contribution was for 2017. However, your contribution limit for tax year 2017 is only $4000. Your custodian must withdraw the $4000 plus earned interest of $400 by April 15 2018 (or Oct 15, 2018 if you filed for an extension). The earned interest is taxable income in year 2017 and must be included on the return for that year or on an amended return for 2017.
If I am wrong please correct me.
