roth sep how to contribute to financial institution 2023

[ugafun]

New in 2023, is the Roth SEP.   How to contribute to a SEP Roth as I have called Chase, Vanguard ,  Fidelity & Charles Swab and they say that the IRS has not given them how to report so they don't offer it?  What is a work around solution to this?  please let me know my email is [email address removed]

[ugafun]

if someone can post here the response would be great thanks

[dmertz]

It's somewhat pointless to ask how to report Roth SEP contribution if the SEP plan agreement doesn't allow for such a contribution.

Once plan agreements are amended to allow for Roth SEP contributions, IRS Notice 2024-02 suggests that the Roth SEP contribution would be taken as a deduction as if it was a traditional SEP contribution followed immediately by an entirely taxable Roth conversion reported on a Form 1099-R for the year in which the deposit into the designated Roth account is made.

Given the information in IRS Notice 2024-02 and because there is no limitation on making a Roth conversion from a SEP IRA, there is no reason not to make a traditional deductible SEP contribution and immediately convert it to Roth.  If one has basis in nondeductible traditional IRA contributions that would result in less than the full amount of the Roth conversion being taxable, this could even result in a better taxable outcome than a directly making a Roth SEP contribution.

[ugafun]

Thanks for the feedback.

actually the point is that the Government has approved the Roth SEP.  

In fact,  Turbo Tax has a place to be able calculate how much you can contribute to a Roth SEP based upon 1099 NEC

Unfortunately, no institution can take the money because the IRS has not given them the reporting.

So what is the work around solution

[ugafun]

how to get this deducted by persons that give a 1099 NEC?

[dmertz · Accepted solution]

Although the change to the tax code makes it possible for SEP plans to offer the option for the contributions to be Roth contributions, SEP plans are not required to offer the option.  Unless the SEP plan agreement offers the option, a Roth SEP contribution is not permitted to be made. 

Correction:  If the SEP plan is established using Form 5305-SEP, the employer can offer Roth SEP contributions before Form 5305-SEP is updated

IRS Notice 2024-02: https://www.irs.gov/pub/irs-drop/n-24-02.pdf

[ugafun]

how come no financial institution can take a SEP Roth 

How to get this setup for 2024?

[dmertz]

I've added the following correction to my previous post:

If the SEP plan is established using Form 5305-SEP, the employer can offer Roth SEP contributions before Form 5305-SEP is updated.

Still, for the time being it would be far simpler to make a traditional SEP contribution and follow it with a Roth conversion.

[ugafun]

this is for getting 1099 NEC not our employer so how to get a financial institution like fidelity vanguard chase or charles shwab to take the money as none can take it .  

they said they are waiting for IRS to give them the reporting information.  Fidelity said this is an industry wide problem.

[ugafun]

any other feedback?