SEP IRA Contribution

Submitted by Colin O on Mon, 2023-06-12 21:12

I have a SEP IRA for my LLC (non-operating entity I use for real estate). I also have a normal W-2 job with a 401k (making more than ira deductibility limit).
I made a contribution of $5,200 to my SEP IRA. I made the contribution on April 10th, 2023, but indicated it was deductible for the previous year 2022.

I intended for the contribution to come from the “employer” of the SEP IRA, but reviewing the 5498 I received, it indicates in Box 1: IRA contributions 5,200. In box 7, it has SEP IRA checked. And then in Box 8: SEP Contributions: $0.

I’m confused as to what went wrong here. Was the contribution coded as a deductible SEP IRA contribution from myself and not the employer?

I already filed my taxes indicating the employer contributed a tax deductible 5,200 to the SEP. And I never filed any deductible IRA contributions for myself. Will the IRS see an issue with this?



Submitted by Alan - IRA critic on Tue, 2023-06-13 00:04

  1. Not clear what caused this problem, but the 5498 should not show the contribution in Box 1 if it is a SEP contribution. Yes, the IRS will see this as a conflict with your 2022 return. A SEP contribution made in 2023 would be reported on a 2023 5498 regardless of the year you intend to report it on your 1040. The 5498 issued  indicates that you made a 2022 IRA contribution to a SEP IRA, which is legal, but it would be non deductible and it not what you intended. Try to get the custodian to issue a corrected 5498 showing no contributions and to code the contribution as a SEP contribution to be reported on a 2023 5498. Unfortuneately, you cannot have the contribution “recharacterized” as a SEP contribution. If they will not agree to the correction, you will have to request that the contribution be returned to you adjusted for gain/loss.
  2. Before considering the above, note that passive real estate activities such as receiving rents is not eligible for a SEP contribution in the first place. Generally, you must pay SE tax on income eligible for a SEP contribution. 

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