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SEP employee contributions


Guest robmc

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Guest robmc

Hello,

You helped me once before Gary. I appreciate it.

Is there anyway curently that business owners can contribute to a SEP IRA as employees through their W2 compensation and then make a discretionary lump sum contribution as employers before they file their taxes? I have a business with 2 owners and no employees this would work great for, however I thought I read that that luxury went away with the termination of the SARSEP

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I'm not Gary but you are correct; employees can't contribute to a SEP IRA. But the employer could make contributions throughout the year, as long as they are ultimately proportionate to income. Is that not enough, or are they wanting to contribute different amounts?

To do exactly what you have described, they would need a 401(k). But I wonder if they they can't come close enough with a SEP.

Ed Snyder

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Purely s a technical matter <<grin>>, contributions should be allocated to ALL eligible employees at the time each contribution is made (in accordaance with plan provisios). In other words, contributions should not be made for owners in January of this year and on April 14 of the following year for rank-and-file employees.

I agree with Bird on plan choice. Perhaps A SIMPLE IRA would be adequate, depending on desired contribution levels

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Guest robmc

Thank you both for your response. They do have a 401k currently Bird, there is a product better suited for them if they would switch to the SEP. With this scenario Gary the only employees are the owners (2), I do hear you on the SIMPLE Gary.... only thing is they want one nice neat plan and the SIMPLE can't handle the rollover from their current plan..

They would just prefer to do weekly contributions right from their paychecks (w2) and then contribute lump sum from the business whatever they feel is appropiate up to the contribution limits before they file for the year. The total contributions would be a percentage of each owners bottom line as they are 60/40. Not possible, I am gathering ??

Are you suggesting Bird, that instead of the w2 withholding week to week they just do an owner/employees contribution week to week?

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there is a product better suited for them if they would switch to the SEP.

Huh? I'm at a loss for what "product" could be better suited for them that's not readily available in a perfectly good 401(k) that permits (or can easily be amended to permit) them to do exactly what you're asking. Please clarify/expand on what you're talking about.

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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