Disability Income and SEP contribution

Submitted by Jonathan Sard on Wed, 2011-12-14 21:42

A client owns a C corporation with one employee. The owner is receiving taxable disability benefits and no salary in 2011. Can he contribute to the company SEP IRA based on the disability income? I believe the answer is no, but wanted to make sure. Thanks!



Submitted by Peter Lingane on Wed, 2011-12-14 21:57

A 5% owner is not allowed to treat disability income as compensation for SEP purposes. See 415(c)(3)(C) and 414(q).



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