Income reported on Schedule K-1 (Form 1120S) is NOT compensation and is NOT to be included in the calculation of the SEP contribution. See IRS Pub 560, page 5, where, with regard to compensation, it explicitly states, “It doesn’t include income passed through to shareholders of S corporations.”
Can an S Corp shareholder make a SEP contribution?
As the sole shareholder of an S corporation, you are free to create a SEP IRA, which is a simplified employee pension individual retirement account. Your company can contribute up to 25 percent of your salary or $50,000, whichever is less, and it books the contribution as an expense.
Who can contribute to an SEP?
Employees must be included in the SEP plan if they have:
- attained age 21;
- worked for your business in at least 3 of the last 5 years;
- received at least $650 in 2021; $600 in compensation (in 2016 – 2020) from your business for the year.
How are SEP contributions reported for a S corporation?
Social Security and Medicare taxes are withheld from your pay reported on your W-2. Your SEP-IRA contribution is also not reportable on your personal tax return because your SEP IRA contribution is made by the S corporation based on your W-2-reported income and deducted as an expense on the S corporation’s income tax return.
Where do I get a K1 from my s-Corp?
I get a K1 from my S-Corp, where do I enter SEP contribution? As a shareholder in an S corporation, you are not self employed. Social Security and Medicare taxes are withheld from your pay reported on your W-2.
How much can I contribute to my SEP plan?
The contribution limits for your SIMPLE IRA plan are separate from the limits for your SEP plan. Assuming you are not also an owner of your employer’s business, you can contribute the maximum to both plans. You can make salary deferrals (salary reduction contributions) of up to $13,000 to a SIMPLE IRA plan in 2019 ($12,500 in 2015-2018).
How to calculate SEP IRA contribution for self employment?
Calculating the Self-Employed Maximum Deductible SEP IRA Contribution: Start with your net profit (income minus expenses) Subtract one-half of your self-employment tax (which is a deduction) Subtract your SEP contribution (also a deduction)
