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My client contributed $1900 to a new SEP account and took the deduction on his 2011 tax return. Upon receipt of his 5498 he learned the money had been deposited in a traditional IRA and not a SEP. How do we correct this? Can he open a SEP account with a different brogerage firm and "roll over" his original contribution without amending his original return? Must he amend his return and pay tax on the non-deductible portion of his original contribution?

If treated as an IRA contribution, only $600 is deductible since he is covered by and participates in his employers 401k plan.
IRA Self-Employed
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William Keats
If this was the broker's error I would not amend the returns. The contribution should be transferred from the IRA to the SEP. However, if client's fault: Amend return to show $600. deductible, and the balance of $1300. is taxable.
Leave a Comment 396 weeks ago

 

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