SEP IRA – Reverse contribution?
If someone contributed to a SEP IRA during the tax year but ended up not having any reportable income (spouse is not involved in the business but has W-2 wages) can they reverse the contribution or can it stay in as a non-deductible contribution? Should it be reversed (taken out) and if so where is that reported if it required to be reported? The tax return has not been done yet for 2017 but the contribution was put in mid-2017 when the business owner believed there would be plenty of reportable income. If taken out he was just going to do a spousal IRA contribution…
Permalink Submitted by Alan - IRA critic on Tue, 2018-02-13 20:53
If the contribution is not returned with allocated earnings, a 10% excise tax on Form 5330 will be due for 2017 and each subsequent year the excess SEP contribution remains. If the contribution is requested to be returned with allocated earnings, any earnings will be subject to tax and penalty on the 2017 return on line 15a and 15b for the income tax and line 59 for the penalty. Yes, he could make a non SEP TIRA spousal contribution to the SEP account if he wishes.