Excess SEP IRA contribution - how to correct

[Razorback]

I live in a Disaster Area so my 2023 taxes are not due until Feb. 3, 2025. My SEP IRA contribution for 2023 was made in 2024 and exceeded the allowable amount by $1,671.00. I contacted Fidelity Investments, where the SEP IRA is invested and asked to designate the amount of over-payment for 2023 as a 2024 contribution. They have yet to respond. If they have already prepared and sent the 1099-R showing all contribution as for 2023 what are my options? I do not want to withdraw the funds and am willing to pay the 10% penalty or $167.10. Do i report this via Form 5330. Thank you!!

[dmertz · Accepted solution]

It's your responsibility, not the IRA custodian's responsibility, to record the year for which the SEP contribution is made.  The custodian is only responsible for recording the year in which a SEP contribution is made, not the year for which a SEP contribution is made.  The designation of the year to which the contribution applies is made by the amount that you report as the self-employed retirement deduction for that year.

There is nothing for Fidelity to do.  Whatever amount was deposited in 2024 must appear on your 2024 Form 5498 regardless of the year for which the contribution was made (in this case part for 2023 and part for 2024).

[Razorback]

@dmertz In this case I contributed $6,000 in April 2024 and $2,000 in December 2024 to my SEP IRA. Thanks to DMertz I understand the custodian will reflect $8,000.00 in the Form 5498 they provide for 2024. 

If I change my Turbo Tax entry for 2023 to $6,000 will this suffice? Or will it trigger an IRS red flag as my reported sEP contribution is only $6,000 for 2024 while the custodian’s 5498 shows $8,000? I’m not sure they will recognize that the $2,000 contribution made 12/21/24 was actually for 2024 (now). Thank you so much!!! Your expertise is valued and appreciated. 

[dmertz]

"will it trigger an IRS red flag as my reported sEP contribution is only $6,000 for 2024 while the custodian’s 5498 shows $8,000?"

No, it will not trigger a red flag.  The $8,000 will be in box 8 of the From 5498 and the IRS knows that amounts in box 8 could be contributions for the year of the Form 5498 or for the year before.  There is nothing wrong with making a SEP contribution for 2024 before the end of 2024.