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Partnership SEP Contribution

yam51
Level 2

This is the first time I've come across this situation so I would greatly appreciate any assistance.

Client (2 member LLC but P&L is only allocated to one of the partners).  The client wants to make a 2019 SEP contribution.  What are the journal entries and how/where do I enter it in Lacerte?

Do I debit Distributions and credit SEP Payable or do I debit a Retirement Contribution-SEP expense account?  If through distributions I would add a note to the K-1 with the amount of the SEP Contribution so the taxpayer can report the amount on his 1040, correct?  If the later is correct, do I enter the expense in the Other Sch K screen under Other Deductions, code R? And the SEP payable amount should be included in Share of Liabilities screen NR debt, correct?

Thank you!!

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PhoebeRoberts
Level 11
Level 11

I don't have any partnerships with SEPs, but I'd think it would be handled the same as SE health insurance, which reduces the 199A deduction once, not twice.

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6 Comments 6
Just-Lisa-Now-
Level 15
Level 15

Its my understanding that since partners are not employees , they make their own SEP contributions and report on their own 1040's like any other self employed person....it doesn't go through the partnership and isnt reported on their K-1's.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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PhoebeRoberts
Level 11
Level 11

This is incorrect. The SEP must be established at the partnership level and the funding comes from the partnership.

The SEP contribution is a separately-stated item on the recipient partner's K-1, and does appear on the 1040 the same way a Schedule C filer's would.

Just-Lisa-Now-
Level 15
Level 15
I stand corrected, thank you.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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yam51
Level 2

Thank you Phoebe!  I did the following which appears to work, but there is one thing I'm not sure of:

In the partnership, I expensed it rather than running it through Distributions and in Lacerte I entered it in screen 22 under Other Deductions with code R.  In the same screen under the Sec 199A section do I need to enter the SEP contribution under Other Deductions?  Without doing so I get an Information Diagnostic, not a Critical one.  If I include it and report it on the Individual tax return, the QBI deduction is obviously less.  Just hoping the separately stated SEP contribution does not need to be included as an Other deduction in the 199A section of the partnership tax return.  : ) 

 

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PhoebeRoberts
Level 11
Level 11

I don't have any partnerships with SEPs, but I'd think it would be handled the same as SE health insurance, which reduces the 199A deduction once, not twice.

yam51
Level 2

Ok, makes sense. Thank you!

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