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SEP-IRA deduction for part of year as solo


Guest noans
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Guest noans

Here is the situation. Owner of LLC from Jan 2013 to current. NO employees. In September, 2013, purchased another LLC that has employees. Can the dr. make a SEP-IRA contribution under her single LLC for income earned BEFORE she also became owner of the LLC with employees? Based just on her January, 2013 to September, 2013 income.

Since the type of work she is doing under her solo LLC and the one with the employees is the same and she is 100% owner of both, I would think that in future years she cannot make that deduction without being discriminatory. But for this split year and her income earned prior to owning other business is what I'm just not sure of

Thank you!!

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It wd appear that both businesses are controlled and all employees therefore treated as if employed by a single employer for 2013. Compensation from both entities must likely be considered for the plan. All eligible employees must participate. Hope this helps.

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Guest noans

Thank you! Verification of what I thought. Accountant keeps insisting that she can take a deduction for the part of the year when she didn't own the LLC with the employees. Have a great day!

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But if she was in business before Jan 1 2013 she can use an eligibility requirement calling for service in one (or more) prior years, and count all of her compensation, with no one else being eligible. Don't let a bad question give you a bad answer.

Ed Snyder

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Guest noans

Not sure if this fits the scenario. She was solo LLC prior to 2013 and continues with that solo practice. She purchased an existing LLC and is solo owner of that LLC as of Sept 2013. The purchased LLC has existing employees and an existing 401k plan with employees eligible for the plan and employer contributions. Then this also brings up...can she have the SEP IRA in same year that there is a 401k? There is 1 yr eligibility on the 401k so the dr isn't actually eligible in the 401k for 2013. The prior dr had already made 401k contributions into the plan. Thoughts?

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If she is using a model 5305-SEP plan, that form clearly states that the employer cannot maintain both an SEP and another qualified plan (it could be done under a prototype plan but that's moot because of the control group rule).

There is 1 yr eligibility on the 401k so the dr isn't actually eligible in the 401k for 2013.

The control group rule also applies to 401(k) plans. Should talk to the people who administer the 401(k) (do they have an outside TPA?) to determine what options she might have there.

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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  • 2 weeks later...

To put a twist on this thread and being naturally suspicious of situations involving doctors I'd bet $10 that for the portion of the year that she was purportedly a solo practitioner with a SEP she was actually in an affiliated service group with the retiring doctors LLC that she purchased. I'd bet another $1 that they're dentists.

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