SEP IRA and Traditional IRA limits for 2009
I have a client with $45,000 1099 income in 2009
Can sheet contribute to both an SEP IRA and traditional IRA?
If so what are the amounts
Thank you,
Marshall
I have a client with $45,000 1099 income in 2009
Can sheet contribute to both an SEP IRA and traditional IRA?
If so what are the amounts
Thank you,
Marshall
Permalink Submitted by mk foss on Tue, 2010-04-13 19:03
The SEP limitation is 20% of (net profit from self-employement less 1/2 SE tax). You can’t get there from the gross income.
If the maximum SEP contribution is less than the maximum IRA contribution ($5,000 or $6,000 if over 50) – you can claim that instead of a SEP.
If income is low enough you could claim both. You’d need less than $55,000 adjusted gross income if single or $89,000 if married.
Permalink Submitted by Marshall L. Howard on Tue, 2010-04-13 22:22
Assuming a 1099 income does my client compute the self-employnent tax first ie $45,000 minus the tax then take the 20% deduction for the contribution and then deduct the $6,000 for the IRA
She is 50+ years of age
Can she combine the two contributions in the IRA account?
Is there a special filing with the IRS?
Thank you,
Marshall
Permalink Submitted by Alan Spross on Tue, 2010-04-13 23:11
The SEP IRA owner can make both the SEP contribution and the traditional IRA contribution to the same account, but must be sure the custodian knows what type of contribution is being made. The custodian reports the contributions on different 5498 (copy to taxpayer and to IRS) forms for that account with the contribution type shown in Box 7. There is box for IRA and another for SEP.
If modified AGI is too high to deduct the TIRA contribution, then Form 8606 should be filed to report the non deductible contribution. In the income phaseout range, some of the contribution may be deductible and some non deductible.