Form 5305-SEP (Immediately preceding 5 years)

Submitted by john walicki on Sat, 2013-01-19 16:50

I have a self-employed client who has SEP in force for his employees. One of the employees just met the 3 years of service in 2012 ( She worked in 2010, 2011 & 2012). Must my client contribute to an IRA for her in 2012? The instructions do not state when the “Immediately preceding 5 years” began. Is it 2007 or 2008?

Help!

Thank you.



Submitted by Alan - IRA critic on Sat, 2013-01-19 19:26

Client does not need to cover in 2012, but does in 2013. The 5 years begins in 2007. See “what is an example of the 3 of 5 years” rule in the attached:http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs#2a



Submitted by john walicki on Mon, 2013-01-21 16:44

Thanks Alan very much you solved my problem.  Have a good one!



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