Advanced Underwriting Consultants

Ask the Experts – March 20

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: I have a client who participates in a simplified employee pension (SEP) plan at work. Can she contribute to the SEP in addition to the employer’s contribution?

Answer: Yes; according to the IRS, non-SEP contributions are permitted if the SEP documents allow them. This means your client can make regular IRA contributions up to $5,500 in 2014 ($6,500 if older than age 50).

Employee contributions to a SEP plan are treated like any other traditional IRA contributions. Therefore, the amount of money your client contributes to the SEP as his regular IRA contribution will reduce the amount she can contribute to other IRAs for the year. Additionally, the amount your client can deduct may be reduced or eliminated due to her participation in the SEP plan.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.