SEP and traditonal IRA

[schirallicpa]

I have a client that is self-employed and wants to put money into retirement rather than pay IRS. He says - take a much as we can in IRA. If I run the SEP calc I can take roughly $10,000. Then I can take $10000 regular IRA too, I think. I haven't run in to a situation before that someone actually has enough money set aside to take advantage of this much!

Just hoping someone could chime in and confirm that I can.

thanks.

[Pacun]

You cannot take 10,000 SEP and 10000 IRA. You could take 10,000 SEP and maybe 5K or 6K IRA, depending on income.

[schirallicpa]

She also has earnings and can take the IRA - sorry.

[Pacun]

By definition IRAs are limited to 5K or 6K.

Calculate the SEP first, then enter the IRA information and make sure you select that taxpayer is covered by a retirement plan at work.

[kcjenkins]

Unless she is doing a spousal IRA as well, in which case, depending on the earnings, she might be able to put 5K each in the IRA, or 6K if old enough.

I agree, tho, you do the SEP first, then you look at the IRA worksheet, put in max and it will tell you how much is allowed.

[Pacun]

I haven't run in to a situation before that someone actually has enough money set aside to take advantage of this much!

I think the answer is simple... he is not reporting all his income.

[Kea]

I know it's rare, but he might just be a good saver. Or, even more rare, he may have inherited some money.