Excess 2024 SEP IRA Contribution
Client has not filed her 2024 taxes yet. Her $20,000 SEP contribution she made in December 2024 put her over her maximum contribution by $710 dollars. Not all of the $20,000 was invested. She has $10,000 sitting in cash in her SEP.
The custodian’s form says that we need to provide earnings/loss attributable to excess contribution amounts. The $710 just earned a money market return of a couple of dollars . Is that the earnings amount? Or, do I need to see how much the entire SEP IRA has made since the contribution and pro-rate the amount?
Permalink Submitted by Alan - IRA critic on Mon, 2025-05-19 17:12
The latter, therefore it does not matter what the excess contribution itself was invested in because the gain or loss on the entire SEP IRA is included in the earnings calculation. If there were gains on the 710 excess, the gains will be taxable for the year in which the excess contribution was made (2024).
Permalink Submitted by Vickie Intriago on Wed, 2025-05-21 16:06
So, due to the market declines she has a whopping loss of $6.50. IS that still accounted for on the excess contribution form from the custodian?
Permalink Submitted by Alan - IRA critic on Wed, 2025-05-21 16:45
The 1099R issued for the removal of excess will be 6.50 less than the excess contribution. Box 2a (gains) will be blank because there were no gains.
The 2024 return should include an explanatory statement indicating the amount of the SEP excess, that it was removed on (the date), and the amount received.