Excess contribution to SEP IRA / Form 5329 or 5330

[MikiD]

Hi all,

A new tax client came to me because he contributed more than he was allowed to his SEP IRA, and he did not withdraw the excess amount in time. He is self-employed with a pretty straight forward Schedule C. He withdrew the excess contribution and earnings this month and now wants me to correct for this error and pay the 6% penalty. This is for tax year 2024. Few questions:

I do not see IRS Form 5330 as being supported in Lacerte...? Do I download this form and file by itself? Or is it form 5329 that I am supposed to use, which does not exclusively list SEP?

Also, do I submit the form with an amended return, or can it be a standalone filing? Is amending the return necessary if we are only paying the penalty?

Thank you for your input,

[sjrcpa]

Use 5329.

5330 is for Qualified Plans. A SEP is not a Qualified Plan.

[qbteachmt]

SEP IRA and SIMPLE IRA are qualified plans. They are covered by ERISA, just exempt from some provisions.

SEP IRA is employer-only contributions.

There is a bit more to correcting for excess SEP IRA, especially after the fact, as there are earnings to compute. A few of the resources:

https://www.irs.gov/retirement-plans/sep-plan-fix-it-guide-contributions-to-the-sep-ira-exceeded-the...

https://www.irs.gov/retirement-plans/sep-plan-fix-it-guide-common-problems-real-solutions

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps

[George4Tacks]

5329 can be sent stand alone. If this is a first time OOPS! use the waiver request.

Waiver of tax for reasonable cause.

The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking reasonable steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows.

1. Complete lines 52a and 52b, and 53a and 53b, as instructed.

2. Enter “RC” and the amount of the shortfall you want waived in parentheses on the dotted line next to line(s) 54a and/or 54b, as applicable. Subtract this amount from the total shortfall you figured without regard to the waiver, and enter the result on line(s) 54a and/or 54b, as applicable.

3. Complete line 55 as instructed. You must pay any tax due that is reported on line 55.

The IRS will review the information you provide and decide whether to grant your request for a waiver. If your request is not granted, the IRS will notify you regarding any additional tax you may owe on the shortfall.

[MikiD]

Thank you all for your input. I will try the waiver as well