SEP Contributions.
Please clarify something for me….. As I understand it, ALL contributions to a SEP are “employer” contributions. But can an employee instruct the employer to withhold “X” amount from his/her payroll and have that amount contributed? and then if the employer so chooses, he can make periodic or random contributions out of his own pocket……Do I have it right so far?
Permalink Submitted by Alan Spross on Thu, 2009-06-04 00:01
Partially. A taxpayer can make regular traditional IRA contributions to a SEP IRA using traditional IRA contribution rules and deduction rules. These contributions would be considered to be traditional IRA contributions even though made to the SEP account. And the IRA custodian would have to be aware of the status of these contributions since showing them incorrectly on Form 5498 would result in problems.
Permalink Submitted by Martin Helmer on Thu, 2009-06-04 12:43
An employee can make elective contributions from his pay, similar to a 401(k) plan, if this feature is contained in a “sarsep’ plan adopted originally by the employer before 1997.