SEP contribution S corp owner

[cpabsd]

Client operates as an S corp.  The only employee is the owner.  I believe they can continue contributing to their SEP but where does the deduction show up?  Would it be deductible as retirement plan on the Form 1120 S or on the front of Form 1040?  I do not believe I've ever run into this for a client but now have it on several.  

[jklcpa]

It goes on the 1120S return.

[Possi]

If it is set up under the corp, and the contributions are from the corp, it will be on the 1120S.

I'm in the same position on my own return, and I make the contributions personally, then take the adjustment on the 1040.

That's my short and sweet. I'm sure there will be more responses.

[Possi]

1 minute ago, jklcpa said:

It goes on the 1120S return.

Always? Do I stand corrected? There I go again...

 

[jklcpa]

A SEP is supposed to be set up at the employer level with contributions from only the employer, in this case the S corp.

https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-sep

The line for SEP contributions on the 1040 is for a sole proprietor owner's share while the Sch C employees' share goes on Sch C, or for the partner's share of the contribution while the employees' portion of the SEP is on the Form 1065.

[Possi]

4 minutes ago, jklcpa said:

A SEP is supposed to be set up at the employer level with contributions from only the employer, in this case the S corp.

https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-sep

The line for SEP contributions on the 1040 is for a sole proprietor owner's share while the Sch C employees' share goes on Sch C, or for the partner's share of the contribution while the employees' portion of the SEP is on the Form 1065.

Perfect. Thanks for the clarity!

[cpabsd]

Thanks everyone for the clarification.  Have a wonderful day!!!

Bonnie

 

[Randall]

And don't forget that only the Medicare wages reported on the W2 are the eligible wages for calculating the SEP amount (S Corp owner).

[Abby Normal]

3 hours ago, Randall said:

And don't forget that only the Medicare wages reported on the W2 are the eligible wages for calculating the SEP amount (S Corp owner).

WHAT!! I've always used box 1 wages. Oops! Do you have any authoritative citation for that?

[jklcpa]

19 minutes ago, Abby Normal said:

WHAT!! I've always used box 1 wages. Oops! Do you have any authoritative citation for that?

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-compensation

What compensation is included in determining SEP contributions for an employee?

For an individual who is not self-employed, compensation included in determining SEP contributions includes:

• wages, tips, and other compensation from the employer subject to income tax withholding under section 3401(a),
• amounts described in Internal Revenue Code Section 6051(a)(8), including elective contributions made under a SIMPLE IRA plan, and
• compensation deferred under a 457 plan.

Compensation doesn’t include amounts deferred under a Section 125 cafeteria plan. Compensation is limited to $270,000 in 2017 and $265,000 in 2015 and 2016.

---

What compensation is included in determining SEP contributions for a self-employed individual?

For purposes of the SEP plan rules, a self-employed individual’s compensation means net earnings from self-employment determined under Internal Revenue Code section 1402(a).

[Abby Normal]

1 hour ago, jklcpa said:

For an individual who is not self-employed, compensation included in determining SEP contributions includes:

• wages, tips, and other compensation from the employer subject to income tax withholding under section 3401(a),

Which would often be Medicare wages, but not if you add shareholder health insurance to box 1. And, usually, if there's a SEP, there wouldn't be a SIMPLE or 457, in which case Box 1 would have the right number, most of the time.

[jklcpa]

6 minutes ago, Abby Normal said:

Which would often be Medicare wages, but not if you add shareholder health insurance to box 1. And, usually, if there's a SEP, there wouldn't be a SIMPLE or 457, in which case Box 1 would have the right number, most of the time.

Uh, sorry, I wasn't disagreeing with you and think your argument might be with Randall?  I was only providing the code sec you asked for that defines compensation for purposes of the SEP, and basically I agree with you.

[Abby Normal]

No arguments here. I was just worried I had done it wrong in the past when Medicare wages was mentioned. Now I'm relieved.