Permalink Submitted by mk foss on Wed, 2012-06-27 16:27
An S corporation can establish a SEP IRA. The contributions (deductible on the federal return of the S corp) are based on the salaries of all participants. So the S Corp owner’s salary (and not his/her share of profits) is the base for a contribution of up to 25%. Employees receive the same percent contribution as owners.
Permalink Submitted by mk foss on Wed, 2012-06-27 21:29
Look at IRS Pub 3998 that says “any employer” can establish a SEP. This type of plan is not just for the self-employed. I have clients with corporations that use a SEP retirement plan. The big advantage is that there is no IRS reporting for the adoption of the plan or onlgoing operations.
Permalink Submitted by Alan Spross on Thu, 2012-06-28 03:45
Robert,
Your reference to Pub 560 relates to self employment income and Sch SE. An S Corp shareholder does not file Sch SE since they receive a W-2 and SS and Medicare are deducted like a typical salaried employee. Not filing Sch SE does not mean the S Corp shareholder cannot qualify for a SEP IRA or other retirement plan.
Permalink Submitted by mk foss on Wed, 2012-06-27 16:27
An S corporation can establish a SEP IRA. The contributions (deductible on the federal return of the S corp) are based on the salaries of all participants. So the S Corp owner’s salary (and not his/her share of profits) is the base for a contribution of up to 25%. Employees receive the same percent contribution as owners.
Permalink Submitted by Robert Wright on Wed, 2012-06-27 16:34
Thanks mgtf4cpa.
Do you happen to have a link to a source that indicates that S-Corps are eligible to establish a SEP.
When I read Pub 560, it says on page 5:
http://www.irs.gov/pub/irs-pdf/p560.pdf
“An individual in business for himself or herself, and whose business is not incorporated, is self-employed.”
The “not incorporated” wording makes me question if the S-Corp is eligible.
Permalink Submitted by mk foss on Wed, 2012-06-27 21:29
Look at IRS Pub 3998 that says “any employer” can establish a SEP. This type of plan is not just for the self-employed. I have clients with corporations that use a SEP retirement plan. The big advantage is that there is no IRS reporting for the adoption of the plan or onlgoing operations.
Permalink Submitted by Alan Spross on Thu, 2012-06-28 03:45
Robert,
Your reference to Pub 560 relates to self employment income and Sch SE. An S Corp shareholder does not file Sch SE since they receive a W-2 and SS and Medicare are deducted like a typical salaried employee. Not filing Sch SE does not mean the S Corp shareholder cannot qualify for a SEP IRA or other retirement plan.