Tracy Lee Posted February 17 Report Share Posted February 17 TP owns 100% S Corp. He is his only employee. He opened a Simple IRA but did not fund it through payroll, now he owes a chunk of money to IRS and wants to fund that Simple IRA. I have no experience with Simple IRAs, but it would appear in my research, that he does not have that option at this point to fund it through the 1040, it had to go through payroll and show on his W2. I put $5000.00 on Line 16 Sch 1 under Simple401K contribution but nothing flows through to the 1040, which is understandable because he is not considered self employed. Is there any other way to contribute to a Simple IRA to reduce his tax liability on his 1040 without going back and amending his payroll for 2023? Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted February 17 Report Share Posted February 17 https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-simple-ira-plans#depositing When must I make the matching and nonelective contributions? You must make matching and nonelective contributions to the financial institution maintaining the SIMPLE IRA no later than the due date for filing your business's income tax return, including extensions Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 17 Report Share Posted February 17 13 minutes ago, Abby Normal said: You must make matching and nonelective contributions to the financial institution maintaining the SIMPLE IRA no later than the due date for filing your business's income tax return, including extensions Well that would allow him to make a 2 % non elective contribution. "You must deposit employees' salary reduction contributions to their SIMPLE IRAs within 30 days after the end of the month in which the amounts would otherwise have been payable to the employees in cash, according to IRS rules (IRC section 408(p)(5)(A)(i)). For self-employed persons with no common-law employees, the latest date for depositing salary reduction contributions for a calendar year is 30 days after the end of the year, or January 30th" Due to this rule, amending his payroll won't work either. 1 Quote Link to comment Share on other sites More sharing options...
Tracy Lee Posted February 17 Author Report Share Posted February 17 I also read those rules, so am I correct in my understanding that 'that ship has sailed' and he can NOT fund his Simple IRA at this point? Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 17 Report Share Posted February 17 5 minutes ago, Tracy Lee said: I also read those rules, so am I correct in my understanding that 'that ship has sailed' and he can NOT fund his Simple IRA at this point? Well he can't make an employee contribution which would reduce his box 1 - W 2 income. However as Abby points out he could make the 2% non elective contribution assuming that had been elected prior to the end of the year. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 17 Report Share Posted February 17 The S Corp still can open and fund a SEP, which is an employer only plan. 3 Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted February 17 Report Share Posted February 17 31 minutes ago, Lion EA said: open and fund a SEP Up to the lessor of 25% of compensation or $66,000. SEPs work well with S Corps. 2 Quote Link to comment Share on other sites More sharing options...
BrewOne Posted February 17 Report Share Posted February 17 I was thinking a 25% SEP plan works out to 20% but that may just be for self-employed? Anyway, in trying to verify that, I discovered I may have allowed a client to put too much money into his IRA's--I thought you could contribute to your SEP and an IRA as well. This is correct; however, your total contributions cannot exceed the SEP IRA contribution limits. IRA's are trickier than many folks think. I had a client who would tell me about his Traditional IRA contributions--one year I mentioned Roth's and he said, oh I put $6,000 in my Roth as well but I didn't think I needed to tell you about that. He had been putting the limit into both types for years, what a mess to straighten out. Then the year after he retired, he was still putting money into his IRA... geez 1 Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 17 Report Share Posted February 17 11 hours ago, Lion EA said: The S Corp still can open and fund a SEP, which is an employer only plan. Yes, but since he already has a SIMPLE Plan established, he doesn't qualify for automatic approval using form 5305 - SEP. From Pub 560 - "When not to use Form 5305-SEP. You can't use Form 5305-SEP if any of the following apply . 1. You currently maintain any other qualified retirement plan other than another SEP. " Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted February 17 Report Share Posted February 17 2 hours ago, Lee B said: , he doesn't qualify for automatic approval using form 5305 - SEP. but that does not mean he cannot open up a SEP. He needs to see his financial advisor to hammer out the details. Quote Link to comment Share on other sites More sharing options...
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