SEP AND IRA CONTRIBUTIONS

[jmbillmeyer]

I have a client whom has a SEP and traditional IRA, she made contributions to both in 2023 but due to income limitations the IRA contributions are nondeductible. On the tax front she would benefit more by taking the IRA deduction than the SEP, but does she have to take the money back out of the SEP if we go that route?

[TaxGuyBill]

I'm not sure if they can un-do the SEP at this point.  But I'm not sure of the rules for removing a contribution that is NOT an excess contribution.

For the future, your client may want to wait to make any contributions until AFTER you prepare most of the tax return so she can get your input.

[qbteachmt]

"she would benefit more by taking the IRA deduction than the SEP"

The SEP already reduces business income. Nothing you do with the SEP is going to resolve the issue of IRA income limitations related to deductibility. Why not put a nondeductible IRA amount into Roth IRA, and benefit from a nontaxable future?