SEP

Submitted by Henry Chan on Tue, 2023-09-19 19:20

A taxpayer used to have a schedule C and makes SEP contribution. Now he is a partner in a partnership. Is it correct he cannot make SEP contribution? Instead, the partnership needs to setup a SEP plan that contributes for him? Thank you.

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Permalink Submitted by William Tuttle on Tue, 2023-09-19 20:58

The partnership must set up the SEP IRA plan, but the contributions come from each partner’s self-employed earned income. Each partner controls their own SEP IRA. This individual can use the existing SEP IRA or open a new one.
From IRS regulations; “the partnership is considered to be the employer of each of the partners. Thus, an individual partner is not an employer who may establish a qualified plan with respect to his services to the partnership.”

Permalink Submitted by Henry Chan on Tue, 2023-09-19 21:27

If you can provide the citation of the regulation for my file, that would be great. Thank you.

Permalink Submitted by Henry Chan on Sat, 2023-09-23 02:29

Besides haveing the partnership set up SEP IRA so the partner can make SEP IRA contribution, what other options does the partner have for retirement contribution if the partnership does not set up the SEP IRA? Thank you.

Permalink Submitted by William Tuttle on Wed, 2023-09-20 12:24

Based on 26 US Code 401(c)(4) and incorporated by 408(k)(8)(A)

Permalink Submitted by David Mertz on Wed, 2023-09-20 12:44

26 CFR 1.401-10(e)(1) contains the quoted text.

Permalink Submitted by William Tuttle on Sat, 2023-09-23 03:34

If the employer (partnership) does not set up an employer retirement plan. The only option for an employee is to make IRA contributions.