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Level 1
posted May 19, 2021 12:13:16 PM

Excess SEP contribution

I have an excess SEP contribution in 2020, but do not wish to withdraw the excess.  I will only deduct the maximum allowed on my taxes, which is less than the excess.

 

I have read in other forums that if I leave the excess in, I will be subject to a penalty and must reduce the maximum contribution for 2021 by the 2020 excess amount.

 

Is this correct?  If so, what would be the penalty?

0 2 293
2 Replies
Level 15
May 19, 2021 12:35:58 PM

6% of the excess. 

Level 1
May 19, 2021 2:49:29 PM

Thank you.

IRS confirmed that is the correct penalty.  They also advised I fill out form 5329 to account for the overcontribution and penalty.

However, Turbo Tax does not automatically introduce this form and when I introduce the form manually it is very cumbersome to input information.  It does not allow me to input the required information.

 

Any advise?