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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16547
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Hi Bill, I have a SEP IRA question. I have an S Corp and

This answer was rated:

Hi Bill,

I have a SEP IRA question. I have an S Corp and paid myself $30k in W2 wages for 2012. I have an extension for 2012 taxes. I am going to make a $6000 contribution to my SEP IRA before Oct 15th for the 2012 tax year. I want to make this out of my personal funds, not the business, as my business return has already been completed and it would be somewhat expensive to amend at this point. I did not deduct the SEP IRA contribution as a business expense. Can I make the $6000 contribution from my personal funds? This would mean the SEP IRA contribution is not reflected in any way on the 1120S business return. Is that allowable?

Thanks much.

Maria H.

MyVirtualCPA :

Hello, Maria

MyVirtualCPA :

Bill is unavailable, but I am able to address your concern. My name is XXXXX XXXXX I am a CPA.

MyVirtualCPA :

How are you today?

MyVirtualCPA :

Unfortunately, when you have an S Corp, the contributions to the SEP IRA are reflected on the 1120S return. So, what that means is you would need to amend your 1120S tax return in order to reflect the additional payment made.

MyVirtualCPA :

An individual could not deduct the cost of a SEP IRA contribution made for themselves - but you can if you are an S Corp because you are considered an employee.

MyVirtualCPA :

You can read more about this in publication 560 which is available HERE

Customer:

So...not clear. So since I have an S Corp, I can make the contribution out of my own funds and not reflect that in my business tax return

MyVirtualCPA :

No, you cannot...it will have to go through your business, and be deducted on your business tax return

MyVirtualCPA :

which in turn flows through to your personal return

Customer:

Oh...ok.

MyVirtualCPA :

I'm truly sorry if this is inconvenient for you

Customer:

The only way I can do that is to take it as a business expense.

Customer:

Thanks. I understand

MyVirtualCPA :

That is correct. An indvidual can never deduct a SEP contribution they make for themselves

Customer:

Got it. Thank you.

MyVirtualCPA :

You're welcome. If you would, please rate my resopnse as "excellent" so that I may receive credit for assisting you today

Customer:

One more thing

Customer:

Related to this

MyVirtualCPA :

okay go ahead

MyVirtualCPA :

and when you are finished, please rate again because it didn't go through last time

Customer:

Thanks...ok. I am going to make the SEP IRA contribution out of the business (will amend return). I also have a solo 401k and the S Corp made a contribution to that as well. Is it allowable to make contributions to BOTH a SEP IRA and a solo 401k?

MyVirtualCPA :

Yes, you can contribute to both and deduct contributions to both those accounts

Customer:

Thank you. :>) I will rate as excellent once again, and make sure it goes through.

MyVirtualCPA :

Ok great, thanks I appreciate it

Megan C and 3 other Finance Specialists are ready to help you
Thanks, Maria for your positive rating. Please come back and visit MyVirtualCPA any time you need a tax, finance, or social security question answered. It was a pleasure working with you today!

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