Simple Ira

[Guest 401kproman]

If my last contributions to a SEP were made in 2001, can I start a SIMPLE IRA in 2002? Do I have to do anything with the existing assets in the SEP, like a plan termination?

I assume that as a "self-employed" all my income from the business (even that not reported on a W-2) is treated the same whether in the SEP or SIMPLE. Am I correct?

[Appleby]

Yes, you may establish a SIMPLE for year 2002. This must be done by October 1,2002

There is no formal way to terminate a SEP. If you have other employees, just notify them in writing that the SEP is terminated. You and those employees may either retain the assets in the SEP IRA or transfer the assets to a regular traditional IRA.

The definition of income for a Self-employed individual is not the same for a SEP and a SIMPLE.

For a SIMPLE, compensation is net earnings, before subtracting contributions to the plan.

For a SEP IRA, compensation is reduced by contributions made to the plan.

[Guest 401kproman]

Thanks.

Just to clarify. As a self-employed, all my 1099-Misc income counts as earnings?

Do you know where I report the deferrals and the match? As a self-employed, the IRS instructions require that I use line 29 of my 1040, not schedule C. Is this for both types of contributions or does the match go to Schedule C so no FICA, etc. is deducted?

In an IRS publication, it mentions reporting salary deductions on the W-2, but I don't have a W-2.

[Gary Lesser]

The entire contribution made to an SE is claimed on the 1040. A SE does not generally receive a 1099 (see ILM 200117003 and Rev Rul 69-184 [1969-1 CB 256]). The starting point is bottom line schedule C.

A SE employed individual CAN NOT receive a W-2 from his/her business. SE income is not "wages" for FICA, FUTA, or FIT source withholding.