topic SEP IRA and 401K contribution household wage criteria? in Retirement tax questions

SEP IRA and 401K contribution household wage criteria?

SEPIRAUSER — Thu, 06 Jun 2019 13:41:18 GMT

Is there any limit based on the household income to contribute to SEP IRA(Sole Prop.) , Spouse 401 K(18K), Different employer 401k (18K) during the same year?Scenario: Sole Prop Profit 80K, W2 Self income 60K, W2 spouse Income 90 K. Maximize deduction goal= (80/ 4)=20k+18K+18K

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions">https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions</a>

"Spouse 401 K(18K), Different employer 401k (18K) during...

SweetieJean — Thu, 06 Jun 2019 13:41:20 GMT

"Spouse 401 K(18K), Different employer 401k (18K) during the same year?"
The maximum is $18k per person, not per employer.

Yes. My question is can I put 18 K towards a W2 employer...

SEPIRAUSER — Thu, 06 Jun 2019 13:41:21 GMT

Yes. My question is can I put 18 K towards a W2 employer towards 401k Plan while my wife puts 18K towards her W2 employer 401K plan in addition to 25% of my Sole Prop Profit towards my SEP IRA. Assuming that my Sole Prop NetProfit is 80 K and 25 % of that is 20k. My W2 employer is different than my Sole Prop and is different than my Spouse W2 employer.

Yes, you can put into a 401K & a SEP IRA in the same tax...

Critter — Thu, 06 Jun 2019 13:41:23 GMT

Yes, you can put into a 401K & a SEP IRA in the same tax year ... read the rules in the link posted above.

As indicated in the link above, the amount of the regular...

SweetieJean — Thu, 06 Jun 2019 13:41:25 GMT

As indicated in the link above, the amount of the regular IRA contribution that you can DEDUCT on your income tax return may be reduced or eliminated due to your participation in the SEP plan.

Can you paste the section so that I can ready carefully....

SEPIRAUSER — Thu, 06 Jun 2019 13:41:26 GMT

Can you paste the section so that I can ready carefully. Sorry for asking again and I really thank you for your help. I just need to make sure that there is no Income CAP.

https://www.irs.gov/retirement-plans/plan-participant-employee/2016-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work">https://www.irs.gov/retirement-plans/plan-participant-employee/2016-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work</a>

THanks that table is very informative. So for a Married F...

SEPIRAUSER — Thu, 06 Jun 2019 13:41:30 GMT

THanks that table is very informative. So for a Married File Jointly with AGI more than 118K there is no deduction for IRA. does the same assumtption hold true for SEP IRA? Your first answer contradticts with the comments by Critter#2 user. which one is correct?

SweetieJean, your reference applies to regular personal I...

dmertz — Thu, 06 Jun 2019 13:41:31 GMT

SweetieJean, your reference applies to regular personal IRA contributions, not the contributions being discussed here.

The $18k amounts are individual employee elective deferrals subject to section 402(g) limitation. SEP IRA contribution are employer contributions limited under section 402(h). These are independent limits.

As Zbucklyo mentioned, for a self-employed individual, a...

dmertz — Thu, 06 Jun 2019 13:41:33 GMT

As Zbucklyo mentioned, for a self-employed individual, a special calculation must be done because, in determining the amount of which 25% is able to be contributed to a SEP IRA, net profit must effectively be reduced by the deductible portion of SE taxes and the amount of the SEP IRA contribution itself before multiplying by 25%. This result is equal to reducing net profit by the deductible portion of SE taxes and then multiplying by 20%.

I hope Dmertz is right but need some confirmation. As thi...

SEPIRAUSER — Thu, 06 Jun 2019 13:41:34 GMT

I hope Dmertz is right but need some confirmation. As this will help me put money in my SEP correctly. I will not put anything to my SEP if it's not going to impact on my deduction. Also what's the last date on putting funds to my SEP. I have already opened one account before Oct 1 deadline but have not put any money. Is there any website where I can pretend filing taxes and see it myself if it's allowing me or not do double sure.

A SEP IRA contribution for 2016 can only be made after Ap...

dmertz — Thu, 06 Jun 2019 13:41:37 GMT

A SEP IRA contribution for 2016 can only be made after April 18, 2017 if by April 18, 2017 you submitted a request for filing extension.

I am referring to year 2017 . so I can make my appropria...

SEPIRAUSER — Thu, 06 Jun 2019 13:41:39 GMT

I am referring to year 2017 . so I can make my appropriate contribution by April, Right? Dmertz , are you a CPA by profession?

You will need to wait until you complete your return to f...

Critter — Thu, 06 Jun 2019 13:41:40 GMT

You will need to wait until you complete your return to fully fund the SEP so you should not try to maximize the contribution until then to avoid over contributing.

The deadline for making a SEP IRA contribution for 2017 i...

dmertz — Thu, 06 Jun 2019 13:41:42 GMT

The deadline for making a SEP IRA contribution for 2017 is the due date of your 2017 tax return. That's April 17, 2018 if you do not request a filing extension or October 15, 2018 if you do request a filing extension.

I am not a CPA. I make it a point to know the code and r...

dmertz — Thu, 06 Jun 2019 13:41:43 GMT

I am not a CPA. I make it a point to know the code and regulations because I and my family have many retirement accounts and I've encountered many representatives of financial institutions who don't know these things.

The October 1 deadline is the deadline for establishing a...

dmertz — Thu, 06 Jun 2019 13:41:45 GMT

The October 1 deadline is the deadline for establishing a SIMPLE plan, not a SEP plan. It makes no sense in this case to have a SIMPLE plan rather than a SEP plan. Since the individual elective deferral limit of $18k is already maxed out with the 401(k) elective deferrals, no elective deferrals would be permitted to a SIMPLE plan. Contributions to a SIMPLE plan would be limited to a 2%-of-compensation employer contribution.

If you are a sole proprietor, the contribution limits are...

Zbucklyo — Thu, 06 Jun 2019 13:41:47 GMT

If you are a sole proprietor, the contribution limits are confusing in your situation because your total earned income will be over the social security wage base for 2017 ($127,200). However, the general rule is that the maximum contribution for a sole proprietor is 20% of net profit reduced by half self-employment tax (The 25% limit applies to employees, and many people mistakenly use that, instead of 20%). If you were under the wage base, the maximum contribution you can make is approximately 18.59% of your net profit. It may be slightly more than that in your case.

See IRS Publication 590 for worksheets to calculate your maximum SEP-IRA contribution.

How much can I contribute to my SEP? The contributions yo...

Critter — Thu, 06 Jun 2019 13:41:49 GMT

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:

25% of compensation, or
$54,000 for 2017 ($53,000 for 2015 and 2016 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 $270,000 in 2017 ($265,000 in 2015 and 2016 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.

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

If you’ve contributed more than the annual limits to your SEP plan, find out how to correct this mistake.