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04-15-2008, 09:41 AM
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#1 |
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Registered User
Join Date: Apr 2008
Posts: 6
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Roth/SEP IRA aggregate maximum contribution
Having cold feet about maxing out my Roth contribution (say $4k) and maxing out my SEP IRA (say $15k) for the same tax year as a self-employed individual. It seemed like a good idea at the time but now I question whether the SEP contribution I made falls under the "employer contribution" clause from IRS publication 590 below:
Here is the statement from IRS Publication 590 on Roth/Traditional regarding aggregate contributions: Roth IRAs and traditional IRAs. If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions for the year to all IRAs other than Roth IRAs. Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit. Am I OK? |
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04-15-2008, 11:42 AM
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#2 |
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Registered User
Join Date: Mar 2004
Location: New York
Posts: 1,351
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You are fine. You can max the Roth ans SEP too. All contributions to a SEP are "employer" contributions, whether you are self employed or not. However, self-employed individuals are limited to 20% of income up to $15500, vice 25%.
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04-16-2008, 10:17 PM
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#3 |
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Registered User
Join Date: Jan 2007
Posts: 46
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As you can not max out contributions to both a Roth IRA and a Traditional IRA in the same year, the IRS is basically saying that you have to pick either one or the other.
However, you are confusing "traditional IRA" with "SEP IRA". A SEP IRA is not a traditional IRA, because it is funded by your employer (or your own business, if you are self employed.) Therefore, you are allowed to max out the contribution to both Roth IRA and SEP IRA in the same year, if you wish. |
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06-20-2008, 10:56 AM
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#4 |
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Registered User
Join Date: Jun 2008
Posts: 1
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Roth/SEP IRA?
I've found your site to be usefull tool. I recently have a client, self-employed owner opperator resisting investment into a VUL. He hasn't enough insurance, he wants a ROTH 401K, but doesn't have an existing 401K plan for his company and he wants to be able to comtribute the maximum to a SEP IRA, $46,000. But keeps talking about a ROTH SEP IRA.
Where can I get the rules for IRAs to show this guy? |
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06-20-2008, 01:56 PM
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#5 |
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Registered User
Join Date: Oct 2001
Posts: 1,586
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ReubenlAR,
See IRS Pub 590, Individual Retirement Arrangements. |
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06-25-2008, 10:32 AM
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#6 |
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Registered User
Join Date: Jun 2008
Location: Richmond, VA
Posts: 29
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Does Pub 590 have all the information needed here...or is there another section I can look into?
__________________
Financial consultant specializing in debt counseling.debt counseling |
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06-25-2008, 11:38 AM
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#7 |
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Harold Hecuba Productions
Join Date: Sep 2004
Location: New Berlin, Illinois
Posts: 934
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You could also thoroughly read IRC Section 408 for IRAs, Section 408A for Roth IRAs.
__________________
jb IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment). |
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