CPA Client thinks he can contribute to a SIMPLE and SEP IRA for same tax year

Submitted by Manal Fouz on Thu, 2024-02-08 21:50

A client of ours (who likes to remind us he has 25 years of CPA experience) thinks he can contribute to a SEP and SIMPLE for the same tax year. He is a sole proprietor of one business and the other business that he owns is a corporation. Therefore, he argues they are separate entities and he is allowed to make contributions to both plans.

We’ve sent him the IRS website regarding controlled entities/affiliation rules but it is more concerned about the employees’ treatment. He remains unconvinced that the IRS prohibits contributing to both in the same tax year. He remains unconvinced that these 2 businesses are considered affiliates because he is the 100% owner of each.

Can you please confirm our understanding? Is he right? Where can we find more information?



Submitted by Alan - IRA critic on Thu, 2024-02-08 23:26

  • You are correct. Refer him to the following copied from the SIMPLE IRA adoption agreement instructions:
  • ” Certain related employers (trades or businesses under common control) must be treated as a single employer for purposes of the SIMPLE requirements. These are: (1) a controlled group of corporations under section 414(b); (2) a partnership or sole proprietorship under common control under section 414(c); or (3) an affiliated service group under section 414(m). In addition, if you have leased employees required to be treated as your own employees under the rules of section 414(n), then you must count all such leased employees for the requirements listed above. “


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