SEP contribution moved forward to current year
Client funded a SEP for 2019 with 15k payment in Jan 2020.
She was only allowed to fund the 2019 with $7600 as per her CPA
We called the company and forwarded the difference of $7400 to 2020 since we were still in the time line to do so without penalty or excess tax.
She is only allowed to fund her SEP for 2020 with $6,186.
Questions:
1. Can we move the excess of $1214 to 2021with out excess tax?
or
2. we can’t do that and have to send the $1214 back to the client who will get a 6% excess tax on it?
thank you.
Doug
Permalink Submitted by Alan - IRA critic on Fri, 2021-04-23 15:44
Excise taxes for SEP excess contributions are 10%. It would cost less to request the return of the 1214 excess with earnings. Only the earnings would be taxable and subject to 10% penalty. That also eliminates having to file Form 5330 to report an excess (non deductible) SEP contribution.