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Posted by shermo_6 on February 25, 2007, 12:21 am
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I had the following questions on a SEP.
Our financial institution set up a SEP for my spouse who is
self employed. My spouse has no employees and is therefore
the only participant in the SEP. My spouse contributed
weekly to the SEP.
1. When I reviewed our SEP statement for 2006 I noticed that
the contributions made in the first half of the year were
noted as employer contributions, but contributions made in
the second half of year were noted as employee contributions
(I believe we may have accidently changed this
classification when we changed the weekly contribbution
amount). With only one participant in the SEP (my spouse),
does it matter whether the contributions are labeled
employer vs employee?
2. Based on a preliminary analysis, we may have had a small
excess contribution made to the SEP in 2006. Can this be
reversed? Again, does it matter that the contributions
during the year were labeled employer and employee
contributions? Can I only withdraw the "employee"
contributions to reverse out the excess contribution by my
tax filing date to avoid the potential excise tax? My wife
has an IRA as well. Can we just reclassify some of the
contributions to the IRA that's held by same financial
institution?
3. If we did incur the excise tax, would it be the 6% as an
employee, or the 10% as the employer?
4. With only one person in the plan, do we need to have a
written plan formulas (ie, set contribution rate) as
suggested in IRS publication 560? I would think that with
one participant, discrimination could not occur so this set
contribution rate would not be required.
5. My tax software asked if we had any elective deferrals to
our SEP? (This is not a SAR-SEP.) What's an elective
deferral, and how can I tell if we had any?
Thanks
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