SEP IRA

Archive for November, 2008

Question: Are SIMPLE IRA and Roth IRA considered for the maximum Contribution amount?

I have a SIMPLE IRA through my employer and a Roth IRA on the side. In 2008 I contributed $6,400 combined to both accounts. I was doing my taxes and realized there is a $5,000 Contribution limit, but I thought that was for each account? or are both accounts considered for the limit and I have a $1,400 excess Contribution?

Answer: Dear Adam: For tax year 2008 your Simple max Contribution amount is $10,500 or 100% of your compensation which ever is less. Your Roth is separate and the max is $5000.

If you are over age 50 your catch up amounts are $2500 for your Simple and $1000 for the Roth. Increasing the max amount on both for people over age 50.

In your case no excess contributions.

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts you provided. Click on my profile to read more. Errol Quinn Enrolled Agent Master Tax Advisor

Question: Can I convert my SEP IRA to a Roth IRA?

I contributed the $5000 maximum to my Roth IRA last year (2008). I also contributed an additional $2250 to a SEP IRA the same year. Can I convert the SEP to a Roth under the new 2010 rule? So, in effect I would have $7250 total in the Roth for that year. If so, can I do it now in 2009 or do I have to wait until Jan 1. 2010?

Answer: According to IRS publication 590, you can roll a SEP IRA to a ROTH, paying the taxes, but no penalty. The rollover doesn’t count as a Contribution, so the fact that you also contributed $5000 doesn’t matter.

I believe the issue is the amount of your income. For 2009, it has to be less than $100K. For 2010, there isn’t an income limit. You cannot use the 2010 rules until 1/1/2010.

Kinky Friedman Ballad of Ira Hayes