SEP and Traditional IRA

[Jilliandiz]

Can a Schedule C tax filer, deposit into both a SEP IRA and Traditional IRA for 2007? Is there anything that states the rules on this?

Thanks

[jevd]

Can a Schedule C tax filer, deposit into both a SEP IRA and Traditional IRA for 2007? Is there anything that states the rules on this?

Thanks

See Publication 560: HERE

SEPs are funded through Traditional IRAs which also accept regular IRA Annual Contributions. The deductibility of the contributions will depend upon the taxpayers filing status and Modified Adjusted Gross Income.

As long as the self employed individual has enough income to support both contributions, he should not have a problem.

Publication 590 regarding Traditional & Roth IRAs may be found: HERE

You may also wish to consult the SIMPLE SEP & SARSEP Answer Book if its available to you for mor complete explanations.

[Appleby]

...and if his Schedule C allows him to contribute $5,900 to the SEP, then it means he has at least that amount in (taxable)n income from the business.

Therefore, he may contribute $5,000 as a traditional IRA contribution. The $5,000 can come from any legitimate source.

Here’s another way to look at it…you work for company X and earn $10,000 in taxable compensation. You elect to defer $9,000 to the company’s SIMPLE IRA, which leaves you with $1,000 less any applicable taxes. You take $5,000 from you regular checking account to make your $5,000 IRA contribution. This is OK, as the IRA contribution must be based on your wages reflected in Box-1 op your W-2, but need not come from your paycheck.