Excess SEP contribution

[ACS41]

Taxpayer is sole shareholder in S corp. We are only preparing 1040. Taxpayer took salary of $60,000. Come to find out he made a SEP contributions of $70,000. He is not very willing to have the excess returned to him by April 15th. What line on the 5329 does the excess get reported? I do not see a place for excess SEP contributions in ATX. Should I inform the client that his deduction on the s corp is overstated? Thank you.

[imjulier]

Yes, 1120S would need to be amended for this correction....not the 1040. Since you didn't prepare the s corp all you can do is tell him to amend the scorp and then amend his 1040 accordingly unless an extension is filed to get the 1040 right on the first try. I wonder why the preparer let this happen? Are you sure its not a solo 401K which would allow more contributions?

Julie

[ACS41]

Yes, 1120S would need to be amended for this correction....not the 1040. Since you didn't prepare the s corp all you can do is tell him to amend the scorp and then amend his 1040 accordingly unless an extension is filed to get the 1040 right on the first try. I wonder why the preparer let this happen? Are you sure its not a solo 401K which would allow more contributions?

Julie

No, it is a SEP. Yes, the 1120_S should be amended. However, he personally has excess contributions of $55K ($70-$15K) that are subject to a 6% excise tax.

[Pacun]

No, it is a SEP. Yes, the 1120_S should be amended. However, he personally has excess contributions of $55K ($70-$15K) that are subject to a 6% excise tax.

I think the cap for SEP is 40% of income, NOT $15K.

[ACS41]

I think the cap for SEP is 40% of income, NOT $15K.

25% of W2 wages. Wages were $60,000. That is how the $15,000 is derived. Taxpayer is sole shareholder os S corp.