SEP Plan Sponsor Entity Changed mid-year

[MarZDoates]

Client, was a sole proprietor from 01-01- through 10-10-01 then PSC for the remainder of the year. Both have profits, both with same employees.

How do we allocate the SEP. Does it get a prorata allocation between both entities during the year. Or do we allocate the SEP contribution based upon actual earnings until the wage base is used up from the beginnning of the year.

I dont believe we had SE income to the extent of 170,000 and I know that he didn't pay himself wages in the PSC during the remainder of the year. He will need to fund either by 09-15-02 or 10-15-02. Thank you

[Gary Lesser]

Generaly the CLE contributions can be allocated in any reasonable manner (e.g., on entity compensation up to $170K). From your facts the owner does not have any W-2 wages (just EI). His/her contribution is attributable to just one entity (not shared). Best I cd do with your facts. Hope this helps.

[MarZDoates]

Thanks, Gary.