If a retired individual receives distributions from his deferred compensation plan, can this be counted as earned income for purposes of contributing to a SEP IRA. I know it would not qualify to contribute to a traditional or Roth IRA but are the rules different for a SEP?
To first question, a SEP contribution must be made by the employer, and this individual was an employee who cannot make his own SEP contribution from such income. If these distributions are reported on a W-2, then Box 11 is usually checked to indicate earnings from a prior year. A TIRA or Roth contribution can be made from the W-2 income only for the amount that Box 1 exceeds Box 11, but not more than the IRA contribution limit.
Permalink Submitted by [email protected] on Thu, 2020-10-22 17:50
As a separate question, if an individual has a SIMPLE IRA with their current employer, but received 1099 income this year from their old firm, from AR (accounts receivable) at the time they left the firm, would this income qualify to make a SEP contribution? Or no, since the income wasn’t earned in the current year?