SEP IRA questions
I regularly contribute to a SEP IRA for a business I have had for several years. This year I added an unrelated business activity for which I will file a separate Schedule C. Do I need to set up a separate SEP for my new business? Do I allocate the amounts according to the percentage of the total self employment income each business generates?
I have a similar question for my husband. He will file a schedule C for 1099 income and also has self employment income from a partnership (LLC). I am guessing that the partnership has to set up a SEP for each partner and my husband will need to separately set up a SEP for his sole proprietorship if he wishes to contribute to one. Is this correct?
Thanks, this is getting complicated.
Permalink Submitted by Mary McClelland on Mon, 2008-03-03 19:17
further question: I think I’ve figured out that the SEP needs to be put on the 1065 K-1’s for each partner and then is actually deducted on the front of each of their 1040’s. The contribution is supposed to be the same for each of them but I am not sure how to figure this. I believe the instructions say to follow the instructions for line 28 on the 1040 to determine the amount. If this is figured as net income from self employment, the amount could be different for each partner even though they split the profits evenly because their self-employment taxes could be different–part of the formula for determining the allowable contribution. Both partners had other income and are partially or wholly beyond the max for the SS Self-employment tax.
I’m waiting for a response from the IRS experts on this, but they may not catch me home and, if my experience holds true, may not give me the right answer.