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brendaboo
Returning Member

sep Ira contribution made after return due date

Hi,

I had an extension to file my 2018 return until Oct 15.  I missed that date and am in the process of filing my return now. A few days ago, I contributed to my SEP Ira account for 2018.  Unfortunately I made a mistake and contributed about $1000 too much. I had paid all my estimated taxes on time, and am due a small federal refund, (I owe about $400 CA state tax).

Question is, can I even contribute to my SEP at all at this late date,  even though Vanguard accepted it as 2018 employer contribution?  Since I am due a refund, then does my tax filing deadline then become 3 years later, since that is how long I would have to claim my refund?  If so, then is it ok to contribute to my SEP this late?

Also, If all is ok with the late contribution, how can I account for the approx $1000 overpayment? I haven't sent in the returns yet, so I didn't "file" the incorrect amount.  Can I just have Vanguard apply the overage to my 2019 contribution?  I h

4 Replies
Critter
Level 15

sep Ira contribution made after return due date

You cannot make a late contribution ... don't know how Vanguard could have allowed it at all ... check to see if they made it a 2019 contribution.  

 

Per the IRS :   

When must I deposit the contributions into the SEP-IRAs?

You must deposit contributions for a year by the due date (including extensions) for filing your federal income tax return for the year. If you obtain an extension for filing your tax return, you have until the end of that extension period to deposit the contribution, regardless of when you actually file the return.

If you did not request an extension to file your tax return and did not deposit the SEP plan contributions by the filing due date for that return, you are not allowed to deduct any SEP plan contributions on that year’s return. The contributions may be deducted on the following year’s return.

If you improperly deducted SEP plan contributions on your return, you must file an amended tax return as soon as possible.

 

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions

dmertz
Level 15

sep Ira contribution made after return due date

Since the SEP contribution was made after the extended due date of your 2018 tax return it constitutes a SEP contribution for 2019, not for 2018.  You are not permitted to report this on your 2018 tax return as a SEP contribution.

 

If this contribution made for 2019 is in excess of the amount that you will be permitted to contribute for 2019, you must obtain a return of excess contribution of the excess amount.  You must report the net amount on your 2019 as a SEP IRA contribution.  If you have an excess SEP contribution do not obtain a return of the excess contribution you must file Form 5330 and pay a 10% excess contribution penalty.  TurboTax does not support Form 5330.

 

A SEP-IRA custodian only tracks and reports on Form 5498 the year in which a SEP contribution is made, not the year for which the contribution is made, so Vanguard did not "accept this as a 2018 employer contribution," they only accepted it as a SEP-IRA contribution  It's the responsibility of the employer, not the SEP-IRA custodian, to do that tracking and reporting on the employer's tax return.

brendaboo
Returning Member

sep Ira contribution made after return due date

Hi,

Thanks so much for the detailed reply.

 

I haven't actually filed the return yet.

 

When you contribute to Vanguard they have a drop down menu. When you have contributed the max to your ira, it is not possible to contribute more. I understand though on the SEP that it is a varied amount for many. I called them and they said they so allow clients to contribute to a SEP until the end of the year, as some have different filing dates.

 

If I have Vanguard apply the entire amount to my 2019 SEP contribution, is it ok to leave it in there? Would there be any other issues, as long as that was a "correct" amount for 2019 and there was no excess?  I have already contributed the max less $500 to my 2019 employee ira.

Another thought.....If I can get a First Time Abatement approval from the IRS, would that extend my tax "deadline", therefore extending the time I have to contribute to my SEP?  

 

Any insight greatly appreciated.

Thanks

dmertz
Level 15

sep Ira contribution made after return due date

A SEP contribution can be made at any time of year which makes Vanguard's statement that they permit a SEP contribution until the end of the year meaningless.  However, any SEP contribution made after the due date of the tax return for the previous year (including extensions) can only be a SEP contribution for the current year.  As I said, Vanguard is not the one who "applies" the SEP contribution to a particular year.  Vanguard only reports on Form 5498 the amount of SEP contributions made in a particular year, not for a particular year.  It's your responsibility to track and report the contribution as being for a particular year.

 

The SEP contribution that you made after October 15, 2019 can only be a contribution for 2019, therefore it is a SEP contribution for 2019 and it must be reported on your 2019 tax return (unless you obtain a return of contribution).  If you will have sufficient income from self-employment in 2019 to support the amount of this SEP contribution for 2019 already made, nothing else needs to be done with regard to this contribution.  If your net earnings from self-employment in 2019 are sufficient to support more than the amount of SEP contribution already made for 2019 you have until the due date of your 2019 tax return, including extensions, to contribute the additional permissible amount if you so choose.  If your net earnings from self-employment in 2019 end up being insufficient to support the amount of SEP contribution that you've already made for 2019, you have an excess contribution to deal with.

 

I have no idea what you are referring to as an "employee IRA" or how that contribution has anything to do with your SEP contribution.  If you mean your SEP IRA, how is it that you already know the maximum that you will be eligible to contribute?  The year is not yet over and you likely are not yet able to determine your net earnings from self-employment.

 

The law does not permit the extension of the SEP contribution deadline beyond the due date of the tax return for the year for which the contribution is being made (October 15, 2019 in this case, assuming that you filed a request for extension by April 15, 2019).  The IRS has no authority to waive that deadline.

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