SEP IRA compensation definition for owner of S corp
Hi,
I own an S corp and am considering setting up a SEP plan for the S corp. Assume I pay myself a salary of $50,000, but my S corp has a profit of another $100,000 which is also taxable income to me. If the corporation decides to make a 10% contribution to all eligible employees, is my own 10% contribution based on the $50K or $150K amount? I hope it is based on the $150K amount so my contribution would be higher????
Thank you,
Chris
Permalink Submitted by David Mertz on Wed, 2017-11-29 18:34
You are an employee of the S corp and the contribution that your S corp makes to your SEP-IRA account would be 10% of your W-2 wages, just like any other employee. The SEP contribution that the S corp makes to your SEP-IRA account must therefore be 10% of $50,000 = $5,000.