Ammended return creates SEP Excess contribution
I filed an Ammended 2015 tax return in Sept 2017. This resulted in an over contribution for my SEP (from self employment). The excess SEP for 2015 is $5,297. The 2015 contribution that will be adjusted was paid in on Oct 17,2016. My tax professional says there is a penalty due but cannot find a way to report it. He indicates that maybe my investment company has to report. I think that because the contribution was made in 2016, some of it can be put toward 2015 and the excess put toward 2016 and I do not have to do anything. Does anyone have something to support or refute this.
My investigations have led me to believe that this excess contribution should be corrected by The Self Correction program – the problem was one time, will be corrected by putting excess toward 2016, change was result of an ammended return- not a mistake in the plan.
However, I want to do this right and avoid any further penalties or jeopardize my entire SEP plan.
What do I do?
Permalink Submitted by Alan - IRA critic on Wed, 2017-09-27 02:57
Your contribution in 2016 is applied on your tax return to either 2015 or 2016. The SEP IRA custodian only reports SEP contributions in the year they are made, not the year they are for. Therefore, this entire contribution will be reported on a 2016 Form 5498. The amended return can assign the deductible limit of 5297 to 2015, and the remainder to 2016. This avoids a non deductible contribution for 2015 for which a Form 5330 would have to be filed and a 10% excise tax paid, but also requires that the 2016 contribution made in 2017 also not exceed the deduction limit for 2016. Likewise, the contribution situation prior to 2015 can also come into play. In other words, you have to make an adjustment for contributions applied for the current year rather than the prior year because most SE SEP contributions are done for the prior year. Therefore, you can avoid an excess (non deductible) SEP contribution by adjusting your contributions accordingly.