When is SEP considered terminated
I have a client who is covered by a SEP but has no self employment income in 2015 and therefore cannot make a contribution. She does have W-2 income but according to the IRS instructions cannot make a deductible contribution to a traditional IRA because she covered by a SEP (see attached) and is above the income threshold.
Question: If she terminates the SEP before 4/15 can she make a deductible contribution to a traditional IRA for 2015?
Permalink Submitted by Alan - IRA critic on Tue, 2016-03-22 17:29
A taxpayer with a SEP plan is only considered an active participant IN (not for) the year a contribution is made. If she made a 2014 contribution in 2015 she is an active participant for 2015. Otherwise, she is not and could deduct a TIRA contribution. If she is a participant for 2015, but modified AGI is below the Roth threshold she would qualify to make the Roth contribution.