A prospective client’s CPA has them contributing to a SEP IRA, while offering a Simple IRA for all other employees. The business is an S Corp. The owner’s wages that are being used for the SEP IRA are listed as Compensation of officers (Line 7 of 1120-S). While the remaining employees income is listed as Salaries and wages (Line 8 of 1120-S).

Is there any way they can do this? (I can’t think of any reason it would be allowed)

If not, what corrective actions are needed? They have done the SEP IRA contribution of 25% for the owner for 2 years (2021 & 2022).

Thanks