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We my husband and I have a S-Corp. The W2 employees are myself,

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We my husband and I...
We my husband and I have a S-Corp. The W2 employees are myself, my husband and one other clerical part-time employee. I have filed an extension for S-corp 2014 taxes and personal 2014 tax return. My husband's W2 wages were $125,000. Mine were $65,000. Part-time employee was $4995. I have $30,345 to contribute to the S-corp SEP retirement accounts for all employees. How do I compute how much (percentage) is contributed to each employee's SEP account?
Submitted: 2 years ago.Category: Tax
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7/21/2015
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,859
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi,.Becasue for S-Corps (And C-Corps) you don't have to deal wiith the self-employment tax issues, this is pretty straightfoward..First of all the WAGES (as it looks like you know ARE the BASIS for qualified plancontributions for S and C Corps) - even for profit sharing contribution if you had a 401(k).An S or C corporation, an incorporated partnership or a LLC electing to be taxed as a corporation pays the business owner a W-2 salary. In this situation, the annual SEP IRA contribution can be between 0% to 25% of the owner's W-2 salary up to the SEP IRA contribution limit. SEP IRA contributions are generally 100% tax deductible as a business expense..So any percentage up to 25% .... and there's an overall limit as well, but because this is a SEP the 25% (based on your numbers) is well below that..Let me know if you have questions..Lane
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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
That overall contribution limit for 2015 SEP IRA is $53,000 and $52,000 for 2014.
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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
So doing some quick math 15% for each would be18750 + 9750 + 749 = 29249
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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Hope this helps.Let me know if you have questions.Lane. If this has helped I'd appreciate a positive rating … (by clicking on the stars or smileys on your screen) - That's the ONLY way I can be credited for the work here..
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Tax Professional: Bill, Enrolled Agent replied 2 years ago
Bill
Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3,153
Experience: EA, CEBS - 35 years experience providing financial advice
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Another expert here. Since you have $30,345 to contribute then each employee should receive a contribution of 15.5619%. Hence, the contribution amounts would be $19,452.42, $10,115.26, and $777.32. I'm also assuming that the SEP contributions are not integrated with social security. The contributions would not be integrated with SS if you used the government model agreement Form 5305-SEP.
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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Hi,
Your original expert here.
You asked "How do I compute how much (percentage) is contributed to each employee's SEP account?"
I noticed that I gave you an answer (a round number).
Another answer has been interjected that refined the answer a bit.
But lets actually answer YOUR QUESTION; "HOW do I COMPUTE how much... "
Since you have salaries of $125,000, $65,000, and $4995 ...
... and you want to know what % of those numbers will make the total contribution ...
... you're asking the following question;
WHAT PERCENTAGE OF THESE NUMBERS WILL GENERATE A TOTAL CONTRIBUTION OF $30,345?
THIS IS AN ALGEBRA PROBLEM ... SET IT UP LIKE THIS:
(125000 + 65000 + 4994)(x)=30345
194994 x =30345
x = 30344 / 194994
x = .1556
SO the percentage is 15.56%
Sorry we just gave you numbers, and not what you actually asked asked for ... HOW to compute the number.
Hope this has helped
Lane
I this has helped I'd appreciate a positive rating … (by clicking – or touching on - the stars or smileys on your screen) - That's the ONLY way I can be credited for the work here.
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,859
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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