Retirement SEP

[JCAIN1979]

Can you make a retirement SEP from 1120-S K1 Box 1 - ORDINARY BUSINESS INCOME?

I have a client that has a 1120-S - she also gets a W-2 for 65000.00 from the 1120-s (only employee so no retirement)

and has a profit of 40,274 that is reported on her 1120-S K-1 box 1

Can she make a make a SEP contribution? She says she did with her old accountant - but I don't think she can - 

Please advise when is right - thank you  (and how to explain it to her)

Thank you in advance.

[sjrcpa]

No.

The S Corp can have a SEP. Contributions are based on wages of all eligible employees. The SEP contribution is deducted on the 1120S.

If this is a one person S Corp, she may confused about who contributes and how it is computed.

[qbteachmt]

You're going to want to read up, and send to her, things like these results (google is your friend):

sep ira s corp shareholder

Such as: https://irahelp.com/forum-post/75473-sep-ira-contribution-limit-s-corp/

Because the person wears two hats: As shareholder and as employee. As employee, you have to contribute through payroll which is calendar year, so 2023 has a shut door. There are different provisions for the employer share.

And make sure to read SEP IRA, not SIMPLE IRA or Solo 401(k), unless your taxpayer is shopping for plan ideas.