SEP IRA when employee part year sch C part year

[BulldogTom]

TP worked for company for 6 months, then went into business for himself, sole proprietor, no employees.  Contributed 8K to 401K at work.   SE income will be > 100K.  

Can he open and contribute to a SEP this year?  I know he can if it was all Sch C income for the year, but not sure if contributions to 401K from W2 income plays into this at all.   I don't see anything about this in the pubs.

Thanks

Tom
Modesto, CA

[BulldogTom]

Wow, I thought this was a "Quick Question" and one of you super duper smart people would know.   It must be more complicated than I thought.

Tom
Modesto, CA

[Pacun]

It is a hard question but if you want to be safe, I would ask the person to contribute only 10K.

[Richcpaman]

Yes, he can fully contribute to the SEP  It has nothing to do with the 401K at the former employer.   There is no limitation to $18k, that would only be if he set up a SIMPLE or 401K plan, not the SEP.

Rich

 

 

[BulldogTom]

Thanks Rich.   I think I found that same answer, but it was on the FAQ site at  IRS.gov and I don't like to rely on that.   But I think you are correct, as the FAQ is pretty emphatic that you can participate in both.

Tom
Modesto, CA

[Catherine]

No problem contributing - just watch for the correction for SE and the limitations on total contributions to all plans ($53K? or something similar) for both employee and employer (and as SE he is both).  But it's also limited by overall SE income, so hitting that higher limit should not be an issue.