Treating excess SEP IRA Contribution as an IRA contribution
A client was a sole proprietor in 2014 and will have no self employment income in 2015.
For 2014, he made a $40,000 contribution, but was only eligible for a $36,000 SEP IRA contribution.
Can he treat the $4,000 excess contribution as an individual contribution for 2014?
Permalink Submitted by Alan - IRA critic on Tue, 2015-09-22 20:50
No. Contributions cannot be applied or recharacterized between these two types of contributions. Client will have to remove the excess SEP contribution, but it is now too late to make a new 2014 TIRA contribution with the corrective distribution funds. The reason for this rule is that SEP contributions can only be made by the employer and TIRA contributions can only be made by the individual.