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In a LLC partnership. Two partners equal partners. No

employees. Each putting max into...
In a LLC partnership. Two partners equal partners. No employees. Each putting max into their SEP accounts. Does the contribution have come from the partnership cash account or their personal accounts. Or either.
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11/17/2017
Tax.appeal.168
Tax.appeal.168, Tax Accountant
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Customer reply replied 7 months ago
thank you

In brief, the contribution would have to come from the partnership account. SEE BELOW:

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Partners or members of an LLC taxed as a partnership are considered employees for retirement plan purposes, and thus cannot have individual SEP plans, according to the IRS. Only an employer can maintain and contribute to a SEP plan for its employees.

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Under the SEP plan, the partnership contributes to each eligible employee's SEP-IRA, which each employee owns and controls. The partnership deducts plan contributions for employees other than the partners as a business expense on Line 18 of Form 1065, U.S. Return of Partnership Income and reports plan contributions for partners in Box 13, using Code R, on each partner's Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Partners deduct plan contributions they make for themselves on Line 28 of their Form 1040, U.S. Individual Income Tax Return.

REFERENCE SOURCE:

http://hr.cch.com/news/pension/070111a.asp

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Customer reply replied 7 months ago
in short, for the partners SEP contribution. They can use company checks funds to make contribution does not have to be by their personal checks

Hello again. As the employer (in this case, the LLC) can only make contributions to a SEP, you would need to use a company check and not a personal check.

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Customer reply replied 7 months ago
thank you. I thought so but my client said it had to come from personal funds. I thought that was incorrect. it was worth checking didn't want to give incorrect answer and very hard to find on the internet.

You are very welcome. Why not show your client the information that I referenced and they can see for themselves that only employers can make SEP contributions.

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