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EMPLOYEE SEP CONTRIBUTIONS TAKING BUSINESS NEGATIVE

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Level 3

Here is one I have not encountered before.  Sole proprietor with a W-2 employee who he has set up a employee SEP.  The business is marginally profitable.  If you take the employee 25% SEP contribution, the business is negative and the owner can't make a SEP contribution.  Has the owner made an over contribution to the employees SEP?

Thanks in advance.

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3 Replies 3
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Level 1

Double check which year that employee SEP contribution was made for. Was is a 2018 contribution made in 2019?

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Level 3

2019 contribution for 2019 done before coming to see me (already chastised him for doing that.).

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Level 15

Employee SEP contribution is based on employee wages. It can create a Sch C loss. If there is a Sch C loss owner gets no SEP contribution for himself.


ex-AllStar