How did you determine the excess contributions?
Are you self-employed?
Several issued...
The contribution limit should be determined for each plan separately.
If you have several plans with the same employer - for purposes of contribution limit - they are treated as one plan.
For plan you set for your business - self-employment activities - your overall limit should be reduced by all other contributions.
Let me know if you need any details.
If you provide your numbers - I will help you in calculating the contribution limits.
You need to determine the limit on the employer's sponsored retirement plan and on the plan you set for your self-employed activity separately.
In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax.
Did you make these contributions for 2009? If so - you still have time to remove the excess contribution.
Annual contributions an employer makes to an employee's SEP-IRA cannot exceed the lesser of:-- 25% of compensation, or-- $49,000 for 2009 and 2010 The same limits on contributions made to employees' SEP-IRAs also apply to contributions made to a self-employed individual's SEP-IRA. However, special rules apply when figuring out the maximum deductible contribution. When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment, which takes into account both the following deductions. -- The deduction for one-half of your self-employment tax.-- The deduction for contributions to your own SEP-IRA.Let me know if you need any help.
In this case - there is no choice - you need to remove the excess contribution and pay 6% penalty.
You may not move the money into another plan and avoid penalty.
If contributions were made in 2009 for 2008 - you might be able to recharacterize it as made for 2009.
Otherwise - I do not see any options.
Tax Preparer
Taxes, Immigration, Labor Relations
it is possible to use the excess contribution as a deduction for the following year?
the excess contribution should be distributed - you may not use it as a deduction.
You may use these money as a contribution for the next year - but that will not eliminate the penalty.
Only if the contribution for 2008 was actually made in 2009 - you may recharacterize it as made for 2009 - if that is your case - you need to contact the administrator of your plan - they should have special forms for that.