Can I Still Receive SEP Contributions If I Have to Take RMDs From It?

Thursday, August 25, 2016

By Sarah Brenner and Beverly DeVeny
Follow Us on Twitter: @theslottereport

In this week’s Slott Report Mailbag, we examine SEP IRAs (just like we did yesterday when outlining a major mistake to avoid), their yearly contribution deadlines and how they interact with required minimum distributions (RMDs). As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.

1.

I am turning age 70 ½ this year and have to start taking RMDs from my IRAs. I am also still working and have a SEP IRA. Do I also have to take RMDs from my SEP IRA? Can I still receive contributions to my SEP if I have to take RMDs from it?

Thank you so very much.

Answer:
We get these questions frequently. Yes, you must take RMDs from your SEP IRA. Even though it is an employer plan, it still follows the IRA distribution rules, not the plan rules. The good news is that yes, you can still receive contributions in your SEP IRA. So, each year contributions will go in and required distributions must come out.

2.

What is the latest one can contribute to a SEP IRA for the prior tax year? Is it through the tax extension filing deadline or is it just thru regular April 15 filing deadline?

Answer:
A SEP contribution may be made until the business’ tax filing deadline, including extensions. This is different than the deadline for making traditional or Roth IRA contributions, which is the tax-filing deadline, usually April 15, not including any extensions.

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