I deposited into a traditional IRA in December of 2023. In February, I withdrew the money as I wanted to put in a SEP IRA instead. How do I record that?

[eagleandturtle-g]

I was thinking since it was before April 15, it could just be a reversal of what was done and result in a net 0 traditional IRA deposit. But I'm not sure.

[DianeW777 · Accepted solution]

Yes, you are basically correct. 

You should enter the SEP IRA using the steps in the article below.  The contribution will not be used in your IRA, but instead in your SEP IRA for 2023 as long as it was made by April 18, 2024.

• Where do I enter my SEP IRA contributions?

In 2024 you will receive a 1099-R for the IRA distribution and the taxable amount will be the interest earned for that short period.  You also should've withdrawn any interest earned on your contributions made in December as well.  That will be the reportable income in 2024.

How much can I contribute to my SEP?

The contributions you make to each employee's SEP-IRA each year cannot exceed the lesser of:

1. 25% of compensation, or
2. $66,000 for 2023 ($61,000 for 2022; $58,000 for 2021; $57,000 for 2020 and subject to annual cost-of-living adjustments for later years).

These limits apply to contributions you make for your employees to all defined contribution plans, which includes SEPs. Compensation up to $330,000 in 2023 ($305,000 in 2022; $290,000 in 2021; $285,000 in 2020 and subject to cost-of-living adjustments for later years) of an employee's compensation may be considered. If you're self-employed, use a special calculation to determine contributions for yourself. See this worksheet for the amount you can contribute for yourself.

Contributions must be made in cash; you cannot contribute property.