topic I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement Plans" page's continue btn only returns me to summary. What am I missing? in Retirement tax questions

I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement Plans" page's continue btn only returns me to summary. What am I missing?

ben11 — Fri, 07 Jun 2019 23:18:09 GMT

Except for the purpose of a self-employed health insuranc...

dmertz — Fri, 07 Jun 2019 23:18:11 GMT

Except for the purpose of a self-employed health insurance deduction, you are not self-employed, you are an employee of your S-corp. Unless you have a SARSEP plan established before 1997, SEP contributions are employer contributions only. The contribution to your SEP IRA must be made by the S corp and is deductible on the S corp's tax return, not your individual tax return. The maximum your S corp can contribute to your SEP IRA is 25% of your W-2 compensation.

Since you are not self-employed, you do not need to be using TurboTax Self Employed. TurboTax Premier is sufficient.

Thanks, dmertz! That's the answer I was looking for. I ge...

ben11 — Fri, 07 Jun 2019 23:18:14 GMT

Thanks, dmertz! That's the answer I was looking for. I get it now that I needed to claim the contribution on my company's corporate return 1120S instead of my individual 1040. Perhaps Turbo Tax could add the info in there in for folks who have added a K-1, but no Schedule C. Perhaps it's too much of a niche case. Also thanks for the tip about Self Employed vs Premier!

It's probably beyond the scope of tax return preparation...

dmertz — Fri, 07 Jun 2019 23:18:15 GMT

It's probably beyond the scope of tax return preparation software to provide instruction on the operating procedures of an S corp.

Re: Except for the purpose of a self-employed health insuranc...

Anastasia-CPA — Mon, 02 Mar 2020 16:11:55 GMT

When you say 25% of W-2 compensation, should it be box 1 (Fed wages) or box 5 (Medicare wages) My box 1 is higher because the corp. paid health insurance for the officer and therefore those payments were added to box 1 (with box 14 detailing the health ins payments). Are those payments qualify for purpose of calculating max SEP as part of compensation ?

Re: Thanks, dmertz! That's the answer I was looking for. I ge...

JohnB5677 — Wed, 04 Mar 2020 00:03:13 GMT

The IRS says: "SEP plans (that are not SARSEPs) only allow employer contributions. For a self-employed individual, contributions are limited to 25% of your net earnings from self-employment."

Net income is your take-home pay after taxes and other payroll deductions.

Wage earners can estimate net annual income by subtracting federal, state and local taxes paid year-to-date from the gross income earned year-to-date. This number is net income year-to-date.

Re: Except for the purpose of a self-employed health insuranc...

jeffwill — Sun, 29 Mar 2020 14:36:25 GMT

Anastasia,

You can use box 1 for purposes of calculating a SEP contribution (even if it includes >2% shareholder health insurance premiums. Check out page 4 of Pub 560 under the definition of "compensation" - column 2 https://www.irs.gov/pub/irs-pdf/p560.pdf

Every little bit helps!

Jeff

Re: Except for the purpose of a self-employed health insuranc...

Anastasia-CPA — Sun, 29 Mar 2020 20:51:00 GMT

Thank you Jeff ! very helpful !

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement Plans" page's continue btn only returns me to summary. What am I missing?

Samkhatri — Mon, 12 Apr 2021 17:18:43 GMT

Do I open a sep ira on my company's name as an employer business owner a corporation, or do I open it on my own name ? And how do I report it on my s corporation taxes...

Thanks

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement P...

DaveF1006 — Fri, 16 Apr 2021 02:15:14 GMT

If you are a S-Corp owner, you will need to first establish the Sep with the IRS under your company's name. Please read this IRS link carefully on how to set up the SEP with the IRS. This must be done before you start making contributions for yourself or other shareholders.

Then when you prepare your 1120S return in Turbo Tax Business, you will prepare it in Federal Taxes>deductions>compensation and benefits>Retirement plans contributions. Here you will enter shareholder contributions.

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement Plans" page's continue btn only returns me to summary. What am I missing?

flpc1981 — Sat, 10 Jul 2021 17:50:42 GMT

When you say 25% of my W2, as a business owner with payroll, I also get paid with my business profits in my Schedule K-1, will that count as income to increase the limit for my contribution?

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement Plans" page's continue btn only returns me to summary. What am I missing?

Critter-3 — Sun, 03 Oct 2021 20:45:55 GMT

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement Plans" page's continue btn only returns me to summary. What am I missing?

IHaveABigQuestion — Wed, 02 Mar 2022 18:54:04 GMT

On the IRS link someone posted above, it says "net earnings... don’t include income passed
through to shareholders of S corporations" and I know I read on the IRS site somewhere else that distributions do not count. So the answer to your question is unfortunately no. I do wish TurboTax had more information like this that pertains to S Corp owners!

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement P...

IHaveABigQuestion — Wed, 02 Mar 2022 19:33:05 GMT

I read that SEP-IRA contributions are not subject to:

Federal income taxes, or
Social security and Medicare taxes
FUTA tax

Does this mean I subtract the amount of the SEP IRA contribution from taxable wages on Form 941 and 940? So that would mean at the end of the year box 1 stays the same on the W-2 but box 3 & 5 end up being lower because of SEP IRA contribution?

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement P...

GeorgeM777 — Wed, 02 Mar 2022 20:09:45 GMT

No, you would not subtract the amount from taxable wages on Forms 941, and 940. If you are an LLC member and your company has made an election to be treated for tax purposes as an S Corp, SEP contributions can be deducted on Form 1120S. This means you will be treated the same as any other employee. When an employer contributes to an employee's SEP-IRA account, the contribution can be deducted as a business expense on the appropriate form.

Unlike some other retirement plans, a SEP IRA allows only the employer to contribute. And whatever percentage of compensation employers set aside in the plan for themselves is the same percentage of pay they must contribute for each eligible employee.

For 2021, a self-employed business owner effectively can contribute as much as 25% of his or her net income in a SEP IRA, not to exceed the maximum contribution limit of $58,000. In comparison, a traditional IRA limits contributions to $6,000 for 2021 for those younger than 50, or $7,000 for those 50 or older.

To be eligible to participate in an employer's SEP IRA, employees must be at least 21 years old, have worked at the business for three of the past five years and have earned at least $650 from the job in 2021.

@IHaveABigQuestion

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement P...

ezqferg — Tue, 16 Aug 2022 14:12:28 GMT

So for a single member S-Corp, is the maximum SEP contribution equivalent to 25% of Line 21 of 1120-S or Line 7 (25% of compensation to myself as an officer)? Thank you

Re: I'm an S Corp owner wanting to report a SEP IRA contribution. The "Self-Employed Retirement P...

dmertz — Tue, 16 Aug 2022 16:25:00 GMT

25% of the amount on Form 1120-S line 7 (assuming that you are the only officer) or whatever portion of line 7 pertains to you (if there are multiple officers including yourself). The amount on line 21 has no bearing on the amount of a SEP contribution that the S-corp can make on anyone's behalf.

Re: Except for the purpose of a self-employed health insuranc...

IHaveABigQuestion — Thu, 09 Feb 2023 02:14:10 GMT

@dmertz TurboTax is once again trying to force me to upgrade from Premier to Self-Employed. But like you said, "Except for the purpose of a self-employed health insurance deduction, you are not self-employed, you are an employee of your S-corp." I have been using Turbo Tax Premier for almost 10 years and just last year it started trying to force an upgrade even though I needed no extra tax forms. I'm not doing anything different. A Turbo Tax employee confirmed then that I did not need any of the forms from Self-Employed but did not know how to fix it. How do I convince TurboTax not to force this upgrade each year? They literally advertise Premier as being for S Corp owners. Any ideas how to fix this glitch? Here's the error message even though I am doing nothing different than the years before:

To accurately complete your taxes, you need to upgrade to TurboTax Self-Employed

Why do I need to upgrade?

You have Self-employed health insurance.

TurboTax Premier does not cover this situation

Please tag anyone who can help me fix this problem, it is too frustrating to deal with every year and I definitely don't want to pay an extra hundred dollars each year for forms I don't even need.

Re: Except for the purpose of a self-employed health insuranc...

ThomasM125 — Thu, 09 Feb 2023 03:18:53 GMT

Your schedule K-1 from an S Corporation is reported on a schedule E, page two. Also, you have qualified business income (QBI) issues associated with an S corporation K-1 entry. These are complex matters so that is probably why you need to upgrade to the Premier edition of TurboTax. You mention that you are merely an employee, but processing your K-1 form is much more involved than simply processing a W-2 form. @IHaveABigQuestion

Re: Except for the purpose of a self-employed health insuranc...

dmertz — Thu, 09 Feb 2023 05:00:02 GMT

I would switch to one of the CD/download versions of TurboTax where any version can do any tax return. The higher-priced versions just provide more guidance. Only some versions include preparing a state tax return. You can download the tax file that you've been preparing online and continue in the CD/download version.