SEP-IRA overpayment, Form 5330 questions

[george_c]

I'm trying to fill out Form 5330, as instructed here on the forums (thanks again @dmertz ). I over-contributed to my SEP-IRA in 2018 by $601. My aim is to keep the money in the SEP-IRA and just pay the interest/penalties. I have already offset my 2019 contributions by the $601. 

I have a few questions about filling out Form 5330:

- Items C, D, E, F, G (Name of plan, name/address of plan sponsor, plan sponsor EIN, plan year ending, plan number): are these supposed to be from where I have the SEP-IRA invested (Vanguard)? Or is this referring to something else? The instruction seem to imply that it refers to "the employer", which would be me being self-employed. I'm very confused about this part. 

- It seems to me that what I need to fill out is Part 1, Section A. Line 1 (from Schedule A) seems to be the relevant section. But Line 3a/b mentions "Tax on prohibited transactions" and "tax on failure to correct prohibited transactions". 

In the instructions, "prohibited transactions" all refer to a "disqualified person". I can't tell if that includes me as a self-employed person, where the third item describing "disqualified persons" refers to:

1. "An employer, any of whose employees are covered by the plan."

My best guess is that it doesn't apply to me. Is that correct?

As best I can decipher, in Schedule A I need to enter:

- Line 1: the amount I actually contributed to the SEP in 2018 (in this case $4800)

- Line 2: amount allowable as a deduction (this is the max SEP calculated by TurboTax, $4199)

- Lines 4,5,6,7, 8,10 are all zero

- Line 9, 11 are $601

- Line 12 is $60.10

Back in Part 1, Section A, Line 1, I enter $60.10 from Schedule A, Line 12

Line 2-6 are zero. 

Line 7 is $60.10

Help with any of these individual items would be much appreciated. 

[dmertz · Accepted solution]

I've never prepared From 5330 before, but here is my take on the instructions:  Items C, D, E, F, G refer to the employer, in this case yourself as self-employed.   For item C I would probably just say "SEP-IRA."  For item D you can repeat your name and address.  You probably don't have an EIN since none is required for a SEP plan, so I would leave item E blank if that's the case.  SEP plans are calendar-year plans, so for item F the plan year ended 12/31/2018.  For a SEP plan there is no plan number, so I would leave that blank.

This is not a prohibited transaction, so nothing goes on Schedule C or on Part I lines 3a/b.

Regarding Schedule A, in addition to what you listed you'll also have $601 on line 3.

[george_c]

OK great, thank you for the extra pair of eyes on the instructions. It's tough to know what can be left blank and what is required. 

I actually do have an EIN for one of my Schedule C businesses, as I was required to get one for a sales tax license in one state. But how to tell which business the SEP contribution came from? Safer to just leave blank perhaps? Or does it not matter? The EIN biz had the higher income. 

And good call on Schedule A Line 3, I overlooked that in my summary in the post. 

One other question I thought of: I only need to file this for just 2018, correct? IRS will work out whatever penalty I owe after I file this? 

The form says "Taxes that are reported by the last day of the 7th month after the end of the tax year", which would have been July 31, 2019. I assume the timeframe after that is all about potential additional penalties?

Thanks again!

[dmertz]

If the separate businesses are all under common control, say because they are owned only by you, they are considered to be a controlled group and are required to be treated as a single business for the purpose of your SEP plan.  Presumably TurboTax used the aggregated profit when calculating your maximum permissible SEP contribution.

As for the EIN, the EIN probably is more relevant with regard to filing Form 5330 for a qualified retirement plan like a 401(k).  The instructions indicate to use the same EIN as you would to file Form 5500, but a SEP plan has no requirement to file Form 5500.  You can probably just leave it blank.

As far as I can tell, you only need to file this for 2018, but I'm not entirely certain of that.  Some lines of Schedule A pertain to applying a previously nondeductible amount to a future year, but it's not entirely clear if that's needed only when you still have a nonzero deductible amount for that future year or if you can just not file it if no previously nondeductible contributions remain.  Under Who Must File, the instructions refer to filing when the employer has a liability for one of the excise taxes, so it seems that if you've eliminated the previously nondeductible amount by applying it to 2019, there would be no need to file the form for 2019.

Yes, the last day of 7th month after the end of the tax year is the filing deadline.

[george_c]

Thanks again for the clarifications! 

And yes my multiple Schedule C incomes are aggregated by Turbo Tax for sure. Thank you for the explanation.

And sounds good on the EIN, I got the impression for that entire section that the info was mostly for situations that did not apply to mine (those who are not self-employed), and as I mentioned in the original post it's not clear what info is required and what info isn't applicable (and can be left blank). 

Thanks once more for all your invaluable help!!