Excess SEP-IRA Contribution
Can anyone refresh my memory?
I have a professional who overfunded his SEP-IRA in calendar year 2008 for 2008 tax.
Does he have to request a refund of the excess funds? Or can he apply the monies to 2009? The other issue is that the value of the account has decreased since the initial funding.
Respectfully yours,
Bernard A. Fagnani CPA/PFS
Permalink Submitted by Denise Appleby on Wed, 2009-04-01 23:46
According to the tax code, the amount is recharacterized as an IRA contribution. If the IRA contribution creates an excess, it should be removed under the IRA excess rule.
Publication 560 (which is really not an authoritative source) , allows a sole proprietor or other unincorporated business owner to carry the excess forward to another year. A 10% excise tax would be owed,
If the amount is removed as an excess, the loss is taken into consideration. The loss/earnings is based on the performance of the entire account- and not just the contribution. See http://www.retirementdictionary.com/definitions/netincomeattributablenia