employer SEP IRA and deductible IRA in the same year?
An employer makes very small annual SEP contributions on behalf of an employee. The employee is a non owner, just a simple employee. His W-2 is marked as covered by an employer sponsored plan (the SEP).
His employer contribution to the SEP is only $1,300. The employee is married and together they make over $112,000. So if this was a 401k he could not make a deductible contribution due to income, but if this was a 401k he could elect to put his own money in.
Can he make up the difference between a normal “non covered” contribution and the amount his company put in? ie can he contribute $4,200 to a deductible IRA to make his total contribution $5,500 for 2013?
Or does the SEP (regardless of amount of contribution) preclude him from making a deductible IRA contribution?
Permalink Submitted by Alan - IRA critic on Tue, 2013-05-14 18:52
For the year the SEP contribution is actually made, he is considered covered by a workplace retirement plan and if his modified AGI is too high, he cannot deduct a TIRA contribution. If he is in the income phaseout range he can deduct less than the full contribution allowed. He cannot make up the difference between the SEP contribution and the TIRA contribution limit. He can make a Roth contribution because the Roth income phaseout is higher than the deduction phaseout.