SEP IRA Account Opened in Business Entity Name of Emplyee Name

[kevin_ny_2003]

Do I need to Open SEP IRA in business Entity Name or the Employee Name? My wife is working as an Employee for her S Corp? I am not sure if she opens the account in her name with her SSN how can I deduct this expense while filing Company's S -Corp's tax Return?

Thanks

[dmertz · Accepted solution]

SEP IRA accounts are individual accounts in the name of the employee.  Check with the SEP IRA custodian for the custodian's procedure for the employer to open a SEP IRA account for the employee and for the employer to submit contributions.  The account must be specifically established as a SEP IRA account, not an ordinary traditional IRA account.

The SEP IRA contribution will appear as a pension expense on the S corp's tax return, Form 1120S line 17.  See the Instructions for Form 1120S:  https://www.irs.gov/pub/irs-pdf/i1120s.pdf

[dmertz]

Keep in mind that the S corp must separately adopt the SEP plan, usually with IRS Form 5305-SEP:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/f5305sep.pdf">https://www.irs.gov/pub/irs-pdf/f5305sep.pdf</a>

[kevin_ny_2003]

when do I ned to submit the form 5305 - sep? Before dec 31 2016 or while filing the return? Thanks

[dmertz]

Read the instructions that are part of Form 5305-SEP.  Form 5305-SEP is a form that must be kept in the S corp's files, not filed with the IRS.

Also see Chapter 2 of IRS Pub 560:  <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p560.pdf">https://www.irs.gov/pub/irs-pdf/p560.pdf</a>