Correcting excess contributions to SEP

[shirleys83]

In 2024 I started a side gig, where I was self-employed and received a 1099-NEC.   I contributed 25% of my earnings to a SEP, but I didn't realize that this was based on Net earnings and apparently in actuality the amount I was allowed to contribute was close to 20%.  So in doing my Turbo Tax (which I haven't filed yet), it seems that I have contributed $5500 too much.

I am now contacting Vanguard to remove the excess money from my SEP IRA.  Vanguard is asking if I would like to (a) Recharacterize the contribution to a different IRA contribution type (which is only available to "employee" contribution types) or (b) Remove a contribution from the account as an excess contribution.

Ideally I would like to recharacterize it to a Traditional IRA (I have not contributed any money to a Traditional or Roth IRA in 2024).  But I wanted to ask if I'm allowed to.  Or if my SEP contributions were "employer" contributions, and therefore I must choose the second option (Remove a contribution as an excess contribution). 

Thank you!

[ThomasM125]

Your SEP contributions are limited to 25% of your net self-employment earnings.  However, you may be able to make an IRA contribution up to a limit depending on your age and income. I suggest you enter the $5,000 in TurboTax as a traditional IRA contribution and see if it is allowed without incurring a penalty. If so, your can have the SEP contribution recharacterized as a traditional IRA contribution, otherwise you will have to withdraw the excess contribution.