Guest Taxlady1040 Posted March 6, 2014 Share Posted March 6, 2014 I have a heckuva mess on my hands and need some help sorting out the solution. Client was sole prop/no employees in 2012, and opened a SEP/IRA with Vanguard in June 2013 (missed the solo 401k setup deadline) Contributed a total of $32,909 to the SEP in June 2013 for tax year 2012, of which $17,000 was erroneously included as deferred compensation, and is an excess contribution. This mistake was just discovered this week. Formed S Corp in early 2013, and opened a solo 401k with Vanguard also in June 2013 for 2013 contributions. No employees. Salary deferrals for 2013 reported on W-2 as 12DD are $17,500, but only $14,318 has been contributed so far. Remaining contributions to be made by April 15 to bring the total employee contributions to $17,500. Employer contributions to the 401k for 2013 total $14,530.50. There are additional employer contributions accrued on the books, but have not been made yet. My questions are: 1. Can I get the plan administrator (Vanguard) to return the 2013 employer contributions to the 401k of $14,530.50 without penalty if done so before the tax filing deadline plus extensions? 2. Can I recharacterize or rollover the SEP/IRA excess employer contribution of $17,000 into the 401k plan without triggering penalty or a taxable event, since the SEP/IRA contribution was made in June 2013? 3. I realize I have to file an amended 2012 tax return for the client, but because she was a sole prop in 2012, there are no amended W-2's to deal with. Any help or advise is greatly appreciated. I am sweating the penalties I will have to pay if this scenerio isn't feasible. Link to comment Share on other sites More sharing options...
Gary Lesser Posted April 7, 2014 Share Posted April 7, 2014 Any excess contributed to the SEP-IRA must removed or slowly used up. It can not be recharacterized into anything. Hope this helps. Link to comment Share on other sites More sharing options...
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