Help please? Question about SEP IRA so I can finish this normally easy return.

[NECPA in NEBRASKA]

Is it possible for an individual to contribute to a SEP IRA even though they don't work for the employer that they used to work for and haven't for years? Does it still work as their own traditional IRA? I read the IRS FAQ's and they said if the plan allowed extra contributions, but I thought that it looked like they still had to be an employee. Wells Fargo allowed her to make online contributions and I'm just checking to make sure that it is allowable. Everything that I have been finding says that they must be an employee or self-employed. I am already making her change her ROTH contribution to 2016, because she contributed over the $6,500 limit already for 2015. 

Thanks so much!

[FDNY]

As long as the old SEP allows it she would be able to make regular IRA contributions as well as catch ups.  I had a sole proprietor who had a SEP (so no problem with allowing regular IRA contributions), closed the business and continued to use the SEP as her IRA.  I had confirmed this with I think it was an IRS publication.

Your situation may be a little different being it's a large company with a SEP custodian that will only accept money from employees.

I'm afraid I might not be telling you anything new here.

[jasdlm]

I agree with FDNY.  You'll need to see the plan document to be certain.  The following is from the IRS Retirement Plan FAQs.

If the SEP-IRA permits non-SEP contributions, you can make regular IRA contributions (including IRA catch-up contributions if you are age 50 and older) to your SEP-IRA, up to the maximum annual limit. However, the amount of the regular IRA contribution that you can deduct on your income tax return may be reduced or eliminated due to your participation in the SEP plan.

 

[NECPA in NEBRASKA]

That is what I had found. I'm sending her back to Wells Fargo. They were begging her to put the money in the Sep-IRA and I want them to check the plan document. It was originally from a public school system and she doesn't know where the paperwork is. They told her that she can't pull the money out and roll it, because she's not with the school district anymore. If that's the case, why could she put money in it? 

Why is it that every return I start this year, has problems and I have to start and stop?

 

[JohnH]

-->  Why is it that every return I start this year, has problems and I have to start and stop?  <--

 

Implement a "one-pass" rule.  If the return can be completed on the first pass through, then do it.  If not, then they automatically go on extension while you're waiting to sort out the loose ends.  Of course, that rule coupled with the "everything coming in after March 15 gets an extension" rule, means everything in your inventory right now, plus everything that's yet to come in,  ought to be on extension anyhow.  Sure does simplify life.

[NECPA in NEBRASKA]

I totally agree, John. Unfortunately, a lot of my clients get very upset about extensions. I seem to have lost several that I extended last year after I sent out my engagement letters with a deadline of the 15th. Most of them were small ones that absolutely should have been here the first week of February. I just need to value myself more and charge more. I'm slowly getting better about it.

[mcb39]

3 hours ago, NECPA in NEBRASKA said:

That is what I had found. I'm sending her back to Wells Fargo. They were begging her to put the money in the Sep-IRA and I want them to check the plan document. It was originally from a public school system and she doesn't know where the paperwork is. They told her that she can't pull the money out and roll it, because she's not with the school district anymore. If that's the case, why could she put money in it? 

Why is it that every return I start this year, has problems and I have to start and stop?

 

I wouldn't believe a thing that Wells Fargo says without positive verification.

[Richcpaman]

NECPA:
Have your client open a new account that is just an IRA Account.  She can roll the dollars out of the SEP-IRA account to this new account if she wishes to.

Don't debate the client about if she can, and certainly don't worry about Wells Fargo.  If she can make a IRA contribution, then into a new IRA account it goes.  Sort out what to do after April 15th.

Rich

 

[Randall]

7 hours ago, Richcpaman said:

NECPA:
Have your client open a new account that is just an IRA Account.  She can roll the dollars out of the SEP-IRA account to this new account if she wishes to.

Don't debate the client about if she can, and certainly don't worry about Wells Fargo.  If she can make a IRA contribution, then into a new IRA account it goes.  Sort out what to do after April 15th.

Rich

 

I agree.  Rollover the SEP-IRA to a traditional IRA.  Then it's classified properly for new contributions.  May be too late now but this is the proper way.