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I am a sole proprietor. I set up. SEP IRA a couple days ago…

I am a sole proprietor...
I am a sole proprietor. I set up. SEP IRA a couple days ago at Scwhab. Based on my earning limit, I can only put $12k into it according to TurboTax,My question is, can my wife also put in $12k? Does it go into the same account or a different one?I don’t know if it matters, but we both work at companies that have W2 income ((not related to my sole proprietorship) and I have maxed out my individual contribution. Does this impact what I can put into a SEP?
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Answered in 25 minutes by:
3/16/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,861
Experience: Taxes, Immigration, Labor Relations
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can my wife also put in $12k?

That will be based on HER self-employment income.

Does it go into the same account or a different one?

different - each participant must have separate account.

I don’t know if it matters, but we both work at companies that have W2 income ((not related to my sole proprietorship) and I have maxed out my individual contribution. Does this impact what I can put into a SEP?

In most situation - not.

You maximum contribution into all qualified retirement plans during the year is $54000 for 2017

Within this limit - your SEP contribution based on your self-employment income is not affected.

Let me know if you need any help.

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Customer reply replied 2 months ago
I guess I didn’t fully explain. I am the sole proprietor. SP does not have employees. My wife participates with me, we don’t earn the money and split it, we share the same checking account. The business earned enough for 20% to yield $12k. My question is, can both of us put $12k into a SEP IRA?

The only person who earned self-employment income may make SEP contribution.

That is based on schedule C and schedule SE.
If only your name is ***** ***** your spouse is not eligible for SEP contribution.

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Customer reply replied 2 months ago
I stated she participates. Why not tell me what to do? Rather than state some secondary rule. For example to say, “if you include her name in line xxxx, then yes, you both can contribute, but her account for the SEP has to be separate.

That is not about "include her name"...

Sorry for confusion.

You may not have schedule C and schedule SE with two named... that will not work as you might think.

But you may divide income and expenses if you both are participants - and file two separate self-employment forms.

However - you will also divide net self-employment income

and will divide maximum SEP contribution

still total maximum will be the same.

Let me know your net self-employment income - I will verify your maximum contribution.

Please reconsider your rating.

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Customer reply replied 2 months ago
ok. now it is clear. This is the same info I got from a "2nd opinion" person based on my first question without having to go back and forth. But thanks for clarifying. The key info is that if I hit my $12K cap (which I wrote in the first question) she can't add more on top of that.

Yes - that is correct

But you might thought about a "joint" self-employment activity.

That will not work like that - if you want - you will need to divide and have two separate schedule S's
Sometimes that helps - for instance if you reach your TOTAL contribution limit into all qualified retirement plans - that is $54,000 in 2017

In this case switching some self-employment income to your spouse - assuming she does participate might be beneficial if you still want to maximize contributions.

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Customer reply replied 2 months ago
Just so I understand. My biz, which my wife assists, income allows for $12,245 as the maximum employer contribution for a SEP IRA. Are you saying there is or is not a way for her to also make a contribution even knowing I am going to contribute that maximum amount?

That is correct - that maximum is based on your net self-employment income - and you will not be able to contribute more than that.

You may however split that contribution between you and your spouse because both you participated - but that will require separate schedule C and separate SEP account - still total contribution will not be more.

You and your spouse still may be eligible for traditional IRA or Roth IRA contributions.

But for SEP which is based on that self-employment income - that all you may do.

Lev
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Satisfied Customers: 32,861
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