SEP-IRA Contributions

[Guest batberf]

I am a self-employed individual (with no other employees). My company is organized as a sub-chapter S corporation. I have established an SEP-IRA on my behalf into which my company places contributions.

If I were to become an employee of another company (of which I am not an owner) with a 401k plan (in which I would be an active participant immediately) during the middle of my fiscal (calendar) year, can my sub-S company still contribute to my SEP-IRA up to the maximum of 25% of my W-2 income (from my sub-S corporation)/$40,000?

If so, do the contributions have to be made prior to my new employment or do I have until my sub-S taxes are filed for 2003?

For example, if I were to have $100,000 of W-2 income from my sub-S corporation in 2003, could I contribute $25,000 to my SEP-IRA in 2003 even though I also had $20,000 of W-2 (2003) income from my new employer (that had a 401k plan)?

Thanks.

[Appleby]

Responding in order of your questions…

Yes. Since the two companies are unrelated, then your contributions to one plan are not affected by contribution to the other

No. The contributions are not required to be made prior to your new employment. You still tax-filing deadline, including extensions, to fund your SEP.

Yes.

When you are employed by two organizations that are not under the same ownership (part of a controlled group), the only contributions that are affected/aggregated are your salary deferral contributions. Had both plans been 401(k) plans, you could not have made salary deferral contributions in excess of $12,000 between both ( $14,000 if you are at least age 50 by year-end. )