Discussion:Limit on sep ira contributions when partner has contributions to a 401k plan at his full time employer
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Discussion Forum Index --> Tax Questions --> Limit on sep ira contributions when partner has contributions to a 401k plan at his full time employer
| 10 March 2008 | |
| I have a client who has a full-time position and made 401k contributions for 2007. He would also like to contribute to a sep ira in his partnership. Is the maximum amount he can contribute to the sep ira ($9500) limited by the amount of his 401k contribution? Thank you. If it is, does the same apply if the vehicle was a 403b plan? | |
| 10 March 2008 | |
| The SEP contribution should not be affected by the 401(k) contributions unless the SEP is a SARSEP or the client is a shareholder in the corporation sponsoring the 401(k) plan. | |
| 10 March 2008 | |
| Thank you for the quick response -- the SEP is not a SARSEP and the client is not a shareholder where he works -- there is a book out there that says contributions would be limited so I am thankful for a different answer. | |
Kateherman (talk|edits) said: | 18 March 2008 |
| My client is a doctor at a hospital - he maxed his 403b deferral. he also makes a ton of money on the lecture circuit and wants to fully fund a SEP. does he have to reduce the $45000 max contribution by the $20500 he deferred into hies employer's 403b? I'm going crazy with conflicting answers on this! | |
| 18 March 2008 | |
| No. Try these discussions:
http://www.taxalmanac.org/index.php/Special:Search?search=401K+SEP | |
Kateherman (talk|edits) said: | 18 March 2008 |
| thanks! | |
| 19 March 2008 | |
| Kate, there is a special rule for participants in 403(b) plans who own more than 50% of an entity sponsoring a 401(k) plan. Taxpayers who are in that situation must use a single $45,000/$50,000 Sec. 415 limitation. Thus, the $50,000 must be reduced by the $20,500 deferred into the 403(b) plan. See Sec. 415(k)(4) [reproduced below].
Sec. 415(k)(4) Special rules for sections 403(b) and 408. For purposes of this section, any annuity contract described in section 403(b) for the benefit of a participant shall be treated as a defined contribution plan maintained by each employer with respect to which the participant has the control required under subsection (b) or (c) of section 414 (as modified by subsection (h)). For purposes of this section, any contribution by an employer to a simplified employee pension plan for an individual for a taxable year shall be treated as an employer contribution to a defined contribution plan for such individual for such year. | |
