SEP IRA

Archive for August, 2005

Question: U.S fedral Tax question? ?

sue is an architect for a local firm where she receives as annual salary. she also does interior design out her home office. for 2007 sue’s gross income consisted of 70,000$ in salary and her scheduale C bottom line of $ 50,000. these are the only items affecting lines 7-22 of sue’s 2007 form 1040
supply a written answer to the following questions showing well-labeled computations.
1- What was Sue’s total income in 2007?
2-what was Sue’s adjusted Gross Income in 2007?
3-could sue make an IRA Contribution?
4-could Sue take a deduction for both an IRA and a SEP( or similar)?

Answer: According to your question:
line 7 __________$70,000
line 12 _________$50,000
line 22 ________$120,000 — this is total income
line 27 __________$3,533 — one half of self employment tax (50000*.9235*.153*.5)
line 37 ________$116,467 — adjusted gross income

For Traditional IRA:
deduction phaseout for someone covered by an employer retirement plan is $52,000 to $62,000 MAGI if single or head of household or $83,000 to $103,000 MAGI if married filing jointly or qualifying widow(er). the phaseout if your spouse is covered by a retirement plan and you aren’t is between $156,000 and $166,000 MAGI. There is no phaseout if you and your spouse are not covered by an employer retirement plan.

For a Roth IRA:
phaseout between $99,000 and $114,000 MAGI for single or head of household or between $156,000 and $166,000 MAGI.

Employer contributions to a SEP-IRS will not affect the amount an individual can contribute to a Roth IRA

1) $120,000
2) $116,467
3) yes – but Traditional is deductible only if she is not covered by a retirement plan with her employer, Roth is only allowed if she is married filing jointly
4) no – a SEP IRA would mean she is covered by an employer retirement plan and her income is too high to claim a traditional IRA deduction if this is the case

Question: Can anyone tell me the penalty for early withdrawal from a SIMPLE IRA?

Any information will help, I need to know how it will effect me when I file my taxes and what all the penaltys are.

Answer: Don’t do it if you can avoid it.

You must pay the taxes as if it was taxable when you made the Contribution, PLUS a 10% penalty on top of that. E.g. if that money would have been in the 28% bracket, you will be paying 38% on your money.

There are a few reasons you can take money out (hardship, etc.) that avoid the penalty, but you must still pay the taxes.

Rule#1: Develop a Workable Plan

Question: Can I report the loss with my SEP IRA in my personal income taxes?

I invested $16K in SEP IRA in year 2007 and sold it for only about $12K in year 2009 (before I transferred it to my Fidelity SEP IRA account). Can I report this loss with SEP IRA as a loss in my income taxes? If yes, which section shall I put the figures in?

Answer: No. You never paid taxes on the money going in, so you can’t get a deduction for any losses. Assuming that you did a direct rollover, no taxable event occurred.