SEP IRA and Traditional IRA contributions
We have a client who has a SEP IRA being funded annually by employer, no where near the limit and the client is funding a traditional IRA. Client is over 50 and would like to max the T-IRA plus catch up but his accountant is saying he can not contribute the catch up amount and had the client remove the “excess contribution” for 2022. IS this correct?
Permalink Submitted by Alan - IRA critic on Thu, 2022-04-14 19:25
Client is eligible to make a TIRA contribution with the catch up in addition to the SEP contribution, but may not be able to deduct the TIRA contribution due to active participation in the SEP and the MAGI limits for the deduction. There are no catch up SEP contributions, but that does not prevent client from making a TIRA catch up contribution. Client can make the TIRA contribution to the SEP account, but the custodian might misclassify it as a SEP contribution, so such contribution is best made to a TIRA account.
Permalink Submitted by William Tuttle on Fri, 2022-04-15 13:42
I continue to be dismayed by incompetent professionals when it comes to retirement contributions. Many just make up non-existent rules as they go along.
What is especially concerning is that this has become not that infrequent. It is long past time that the AICPA and state boards of accountancy sanction repeated errors. Which unfortunately are becoming common.
At a minimum this so-called accountant should refund their fee and make the client whole. The accountant should reimburse the client for any taxes on the bogus excess contribution and lost opportunity cost until the contribution is returned.
I now slowly get down off of my soapbox, but incompetent tax professionals are a pet peeves of mine.