Individual is 78 years old and an employee/officer/majority shareholder of a C Corporation that offers a SEP Plan in which it contributes 10% of each employee’s W-2 compensation to the SEP Plan. The 2020 contribution from the C Corporation for Individual is estimated to be $30,000 ($300,000 proposed 2020 W-2 Wages x 10%). Individual is also a director of the same C Corporation and is estimated to receive $50,000 (assume reasonable) as “director fees” in 2020 which will be reported on a 1099-Misc. as nonemployee compensation/self-employment income. Treas. Reg. § 31.3401(c)-1(f) (a director of a corporation in his capacity as such is not an employee of the corporation).

1. May Individual establish a separate SEP for his 2020 self-employment director compensation? If so, is $10,000 ($50,000 x 20%) the maximum amount he can contribute to such SEP for 2020? He would be deferring tax on a total of $40,000 ($30,000 from employer SEP and $10,000 from self-employment SEP). See https://irahelp.com/forum-post/22523-directors-fees;

2. In lieu of establishing a SEP for the director compensation, could he establish a SIMPLE Plan and defer tax on $16,500 ($13,500 maximum normal contribution plus $3,000 catch up contribution) and $1,500 “employer” match ($50,000 x 3%)? He would be deferring tax on $48,000 ($30,000 from employer SEP and $18,000 ($16,500 plus $1,500) from self-employment SIMPLE. See https://www.irs.gov/retirement-plans/how-much-can-i-contribute-to-my-self-employed-sep-plan-if-i-participate-in-my-employers-simple-ira-plan.