IRA deductibility reduced by SEP contribution
Hello….I’ve never dealt with a situation like we have with our client.
Our client had his $5k deductible IRA contribution disallowed because his wife made a $900 SEP contribution for her own business.
Client is self employed and his AGI is $275k and he has no employer plan. He and his wife are separated but filed their 2016 tax return jointly. Wife has her own business and made a $900 SEP contribution. Client’s deductible IRA contribution was not allowed because wife’s SEP was treated as an employer plan and Client’s income exceeded the deductible IRA limit.
Is there any recourse to this?
Permalink Submitted by Alan - IRA critic on Mon, 2017-11-20 18:09
The disallowance is correct. Nothing can be done for 2016. For 2017 and later years, if they continue to file jointly his deduction will be disallowed for years IN WHICH (not for which) she makes a SEP contribution. Perhaps if she cannot make a more substantial SEP contribution than she did, they can work it out for her not to make a SEP contribution.