SEP IRA

Submitted by Colin O on Mon, 2023-07-10 01:16

How much do the plan details that my custodian has for my SEP IRA matter should the IRS become inquisitive?

I opened a SEP in April 2023 and did a previous year 2022 contribution prior to filing (I have a single member run LLC). My custodian provided me their Sep ira adoption agreement when I opened the account, which I filled out and signed. I put the plan effective date as the date I opened the SEP in mid April 2023 instead of 1/1/2022 (didn’t realize until I googled later).

I now realize my accountant also had me sign the 5305-SEP. I compared the two documents and they’re the same in terms of contribution. Does it matter if the “plan” my custodian put in their system aligns with the adoption agreement they gave me (just plan name, effective date, address, things that would be the same on the 5305)? Or does that mean my SEP is technically under a different plan than the 5305 my CPA used to calculate the contribution (25% was what was contributed)? And therefore, the contribution wouldn’t be allowed?

One other quick question, the effective date on the adoption agreement plan is the middle of April. Do I need to get that updated to 1/1/2022 for my contribution for calendar year 2022 to be kosher with the IRS? Or does the plan info the custodian has not really matter to the IRS should they audit me?

Thanks so much!!



Submitted by Alan - IRA critic on Mon, 2023-07-10 15:06

  • Your 2022 contribution is no problem. You should retain your signed copy of the 5305 and provide a copy to the SEP custodian if they want it. Your accountant may want a copy for their records to document the waiting period for any employees you hire and to identify the type of plan you have as a SEP and not a solo K. Your plan is between the IRS and you, so the copy you signed in April is the one you would provide to the IRS in the unlikely event they would ask for it. In the future, I would provide a copy of the 5305 you actually signed to these parties instead of signing new forms. For now, you can ignore those other signed forms.
  • Your SEP custodian reports SEP contribution to you and the IRS on Form 5498. They report contributions in the year you make them, so your 2022 contribution will be reported on a 2023 5498. You assign the year the contributions are for on your tax return. 

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