IRA SEP FOR PARTNERSHIP
I HAVE A CLIENT WHO HAS A NJ LLC FOR MANY YEARS AND IS TREATED AS A DISREGARDED ENTITY & HAS FILED A SCHEDULE “C”. SHE HAS CONTRIBUTED TO HER IRA SEP THE MAXIMUM AMOUNT EACH YEAR. ON JAN 2, 2011 SHE MADE HER HUSBAND A 2% PARTNER(HE IS 71 YEARS OLD) SO THAT THEY CAN HAVE A MEDICAL PLAN. MY QUESTIONS ARE THE FOLLOWING.
1) DO I HAVE TO SET UP A NEW IRA SEP FOR THE PARTNERSHIP OR CAN THE WIFE CONTINUE TO MAKE HER CONTRIBUTION TO HER OLD SEP. THE NAME OF THE PARTNERSHIP IS THE SAME AS THE DISREGARED ENTITY & SAME ID NUMBER.
2) THE HUSBAND DOESN’T WANT TO BE INCLUDED.
3) IS THE AMOUNT THAT CAN BE DEDUCTED & CONTRIBUTED 25% OF HER PROFIT(98%) OR IS IT 20%OF HER NET PROFIT.
4) IS THE PROFIT FOR THE SEP CALCULATION BEFORE OR AFTER THE PARTNERSHIP DEDUCTION OF THEIR MEDICAL INSURANCES.
I WOULD APPRECIATE YOUR ANSWERS AS THE PARTNERSHIP RETURN IS DUE APRIL 17TH
THANK YOU
PAUL SEMMEL
516-626-8450
[email protected]
Permalink Submitted by mk foss on Wed, 2012-03-28 17:17
The new partnership can adopt the SEP plan of the former entity.
There is no age limit on SEP contributions – but all of the partners must participate.
The amount of the contribution is 20% of the profit reduced by the SE tax deduction shown on page 1 of the Form 1040.
With both spouses as partners, the SEP contribution is determined without regard to the medical insurance except that the medical insurance and SEP contribution together cannot exceed the profit from the LLC.
If it remained a single member LLC and she hired her husband as an employee, she could provide a family medical plan for him and deduct the premiums before the SEP contribution is determined. He would actually have to perform services for the LLC in order for this to be a viable alternative.