Permalink Submitted by carlos mendez on Thu, 2024-04-11 00:41
What if the owner did not pay himself and no W2 wages were reported from the business for 2023?
The CPA is telling the client that the business does not qualify to make a 2023 contribution to the employee’s SEP.
the IRS states the following: “Contributions to a retirement plan can only be made from compensation, which, in the case of a self-employed individual, is earned income. Distributions you receive as a shareholder of an S corporation do not constitute earned income for retirement plan purposes (see IRC Sections 401(c)(1) and 1402(a)(2)).”
Permalink Submitted by Alan - IRA critic on Wed, 2024-04-10 23:47
Yes. Max is the lesser of 66,000 or 25% of the owner’s W-2 wages.
Permalink Submitted by carlos mendez on Thu, 2024-04-11 00:41
What if the owner did not pay himself and no W2 wages were reported from the business for 2023?
The CPA is telling the client that the business does not qualify to make a 2023 contribution to the employee’s SEP.
the IRS states the following: “Contributions to a retirement plan can only be made from compensation, which, in the case of a self-employed individual, is earned income. Distributions you receive as a shareholder of an S corporation do not constitute earned income for retirement plan purposes (see IRC Sections 401(c)(1) and 1402(a)(2)).”