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Marvin,EA
Marvin,EA, Enrolled Agent
Category: Tax
Satisfied Customers: 1672
Experience:  Enrolled to Represent Taxpayers Before The IRS
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I am a retired 63 year old self employed individual who will

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I am a retired 63 year old self employed individual who will be limited to net earnings of $14,000 in 2009 by Social Security. I have a SEP-IRA but will only be able to contribute 20-25% (approx. $3,000). If I fully find this SEP-IRA, where can I put the other $3,000 or so? (I am told that I can contribute $6,000 total). Due to an expected MAGI of about $150,000 on my joint return, I may not be able to contribute to Roth. Thanks.
Submitted: 7 years ago.
Category: Tax
Expert:  Marvin,EA replied 7 years ago.
Hello and thanks you for using Just Answer. You can contribute 20% of your net self-employment income after self-employment tax deduction up to maximum contribution of $46,000 into a SEP-IRA.
Customer: replied 7 years ago.
Wait. I am confused. Are you referring to the employer contribution since I have no employees? I thought SEP-IRA is limited to 20% of "compensation" or $46,000 whichever is less. Does this mean I can only contribute the 20% of about $3,000 on the $14,000 of NESE or can I contribute the $6,000 that I wish to all the way up to the $14,000 maximum? Please address the issue of whether I can conribute only approx. $3,000 (20% of $14,000)or the full $6,000 I want to contribute because this is less than $14,000 and certainly less than $46,000. Thanks.
Customer: replied 7 years ago.
Wait. I am confused. Are you referring to the employer contribution since I have no employees? I thought SEP-IRA is limited to 20% of "compensation" or $46,000 whichever is less. Does this mean I can only contribute the 20% of about $3,000 on the $14,000 of NESE or can I contribute the $6,000 that I wish to all the way up to the $14,000 maximum? Please address the issue of whether I can conribute only approx. $3,000 (20% of $14,000)or the full $6,000 I want to contribute because this is less than $14,000 and certainly less than $46,000. Thanks.
Expert:  Marvin,EA replied 7 years ago.
Taxpayers 50 or older can contribute up to $6,000 of their earned income to a Traditional IRA. SEP-IRA can contribute the smaller of $46,000 or 20% of net self-employment income. You can read more about SEP-IRA at www.irs.gov/pub/irs-pdf/p560.pdf on page 6.
Customer: replied 7 years ago.
Last point. May I make the $6,000 contribution to a Tradtional IRA (not IRA?) regardless of income and MAGI? Thanks.
Expert:  Marvin,EA replied 7 years ago.
If you are not cover by another retirement plan you can make the $6,000 contribution to a Traditional IRA. If your wife is cover by a retirement plan , the deduction for the individual's contribution limit amount phases out at following AGI:

$159,000 to $169,000.
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