Impact of SEP-IRA contributions on S Corp LLC

[travisshawty]

Hi! My business was formed in March of 2020, and we achieved S Corp LLC tax status for the 2021 tax year (we did not register as an LLC for the 2020 tax year).

My question concerns SEP-IRA contributions and how they relate to S Corp status. I recently deposited $10,000 into my SEP-IRA for the 2020 tax year and $10,000 for the 2021 tax year. What does that mean for my 2020 (purely self-employed) taxes? Is there a way to get some kind of tax refund? What does it mean for the 2021 S Corp taxes?

Thanks so much for your help!

[AdamNe]

Hello @travisshawty ,

Congrats on your business moving forward and good on you for getting your entity and tax elections set up! 

For 2020, as you are filing a Schedule C as a sole-proprietorship, you will want to claim the SEP contributions as a deduction on your personal tax return. If you already filed your return, you may file an amended return claiming the contributions. In TurboTax, the easiest way to enter those expenses is to search the term "SEP Contribution" and use the "Jump-to" link that appears. You may also find it by browsing the "other deductions and credits" section. Remember, your contributions are only legitimately deductible in 2020 if you had your tax deadline extended for 2020, and you made the contributions before October 15th (or made the contributions prior to May 17th).

To claim an amended return, if you used TurboTax Online for your 2020 return, log in to your Tax Home, scroll to the bottom of the page, and click "Amend (change) return" then "Amend using TurboTax Online."

For 2021, your business will file an 1120-S return for itself. The pension contributions will be deducted in that return. Then, they will flow to you and any other shareholders (partners) on your Schedule K-1 forms. When you enter those forms in TurboTax, you will automatically receive the proper deductions.