I mistakenly wired money into an SEP instead of my...
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New Member

I mistakenly wired money into an SEP instead of my brokerage account. I want to move that but don't want it treated as a distribution. What should I do?

It's too much for me to contribute anyway even if I meant to add money to the SEP.
3 Replies
Level 15

I mistakenly wired money into an SEP instead of my brokerage account. I want to move that but don't want it treated as a distribution. What should I do?

Contact the broker and explain what happened and seek a remedy from them. 

Level 15

I mistakenly wired money into an SEP instead of my brokerage account. I want to move that but don't want it treated as a distribution. What should I do?

I'm not familiar if SEP accounts have different rules than IRAs, but you can reverse a mistaken IRA contribution within 60 days.  You have to take out the mistaken contribution and any gains it earned, and the gains will be taxable income (you will get a 1099-INT or 1099-DIV).  I would assume that SEP plans have the same 60 day window. 

 

There's a more complicated procedure if you discover excess contributions in a future year, hopefully you don't need to follow those rules. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Level 15

I mistakenly wired money into an SEP instead of my brokerage account. I want to move that but don't want it treated as a distribution. What should I do?

In the absence of any indication by you that this was to be anything other than a SEP contribution, the SEP-IRA custodian should have treated this as a SEP contribution, but you must discuss this with the custodian to be sure.  Assuming this to be the case and it happened in 2020, whatever portion of this exceeds the amount that you are eligible to contribute as a SEP contribution is an excess contribution that must be corrected by an explicit return of contribution.  The deadline for doing so is the deadline for filing the tax return for the year in which you made the excess contribution (not 60 days), but you'll want to do this before the end of 2020.  If this happened in some year prior to 2020 or is not corrected, this subject to a 10% penalty on Form 5330 (not Form 5329).  TurboTax does not support Form 5330.

 

A return of an excess contribution made in 2020 will be reported on a Form 1099-R, not a Form 1099-INT or Form 1099-DIV.  If there are investment gains, these gains will be taxable and, if you are under age 59½, to an early-distribution penalty.

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