SEP IRA deductions for non-calendar year question

[Justin]

I have a client with a SEP IRA plan that is maintained on a calendar year basis, however, my client has a 9/30 fiscal year end. How do I calculate the client's contribution deduction on his tax return? Do I deduct a percentage of his annual contributions (e.g. 75% of 2018 contributions)? Or do I simply deduct his annual 2018 contributions, regardless of the difference in fiscal year and SEP plan year?

Thanks,

Justin

[Larry Starr]

You follow the rules for business deductions. Did the co make the contributions during it's fiscal year? If so, then whatever they contributed is deductible.  So, if all of the 2017 (yes, 2017!) contribution was contributed in the fiscal year ending 9/30/18, that is your deduction.  If none of the 2018 contribution was contributed by 9/30, no deduction for the 2018 contribution.  If they contributed all of the 2017 contribution during the 9/30/18 fiscal year and SOME of the 2018 year contribution as well, then you deduct the sum.  Does that help?

[Justin]

Thank you Larry, that helps. Just a follow up question. What wages do you use to calculate any limits on the contribution deductions? Do you use the calendar year wages? Or do you use the fiscal year wages?