CharlesLeggette Posted July 12, 2016 Share Posted July 12, 2016 A CPA called me and said Solo has adopted a SEP in Jan, 2016 and immediately funded it. Now wants to do a CB Plan. I called my brainy Tax lawyer and he immediately responded that the code says that the adoption of the CB plan will disqualify the SEP and the $53,000 will be disgorged by the IRA….No implications…he said that the adoption of the CB plan disqualifies the SEP not the other way around. While I am thrilled by this, I am interested in hearing any comments…. Link to comment Share on other sites More sharing options...
Lou S. Posted July 12, 2016 Share Posted July 12, 2016 Did he give any citation for his reasoning? My understanding is you typically have a deduction problem with the already made SEP contribution. That is you wind up having a partially non-deductible contribution to the SEP as the CB contribution is typically going to be well in excess of 25% of pay so to the extent that the SEP contribution is above 6% of pay it is non-deductible and subject to an excise tax. Link to comment Share on other sites More sharing options...
jpod Posted July 12, 2016 Share Posted July 12, 2016 Was the January 2016 contribution a 2015 contribution? (You can set up a SEP after the close of the first year up through the due date of the tax return for that year.) If so, there can't be any issue here. Link to comment Share on other sites More sharing options...
CharlesLeggette Posted July 12, 2016 Author Share Posted July 12, 2016 No the 2016 contribution was for 2016.....so not yet deducted. Link to comment Share on other sites More sharing options...
Calavera Posted July 13, 2016 Share Posted July 13, 2016 Tax lawyer 's comment about the disqualification may be related to a SEP that was opened with a Form 5305. Otherwise, as Lou S. mentioned above, it is only a deduction problem. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now