SEP IRA

Archive for the ‘SEP IRA’ Category

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Question: Can I rollover a “Rollover IRA” into a SEP-IRA?

I want to consolidate my investment accounts into one for easier tracking, by moving all my Rollover IRA accounts into my SEP-IRA. Can this be done, and what are the disadvantages?

Answer: You can move all your IRA assets into one account. There are no disadvantages, assuming you are keeping your assets and not withdrawing them early.

The new account will not be a SEP IRA account, it will be a generic IRA account. Your custodian will probably create a separate bucket for the new money, which is a good idea from an accounting standpoint.

Question: Tax regarding contract income and business loss?

I work in a contract positions and will make 90K , i was planning to put in 20% ie 18K in SEP IRA .
I also have a startup business this year , which generated 40K in capital losses.

Answer: I think you have some confusion about the startup business.

“Capital loss” is only possible on the disposition of a “capital asset”. Using the word “generated” makes it sound like what you have is an operating loss. That’s actually good news for you. Capitial losses can only offset cap. gains plusanother $3k of ordinary income. This operating loss is ordinary, meaning that you are not limited (unless other limitations apply such as passive loss or at-risk limitations).

Now, before you do a happy dance you have probably not figured the loss correctly. You must distinguish between start up costs ( money spent getting ready to open the doors) and operating expenses incurred once you are in biz. Start up costs must be amortizwed ( you can elect to expense up to $5000 of start up costs) but you must amortize the excess above $5000 over a 15 year period.

SEP-IRAs are set up on a per business basis. If youv had employees in one biz, it is not right that they be shorted because you lost $$ in another biz. This is true even though you have no employees.

Also, even though you will net your bottom lines for SE tax , you must figure SE tax on the SEP IRA biz only and reduce net income by half of SE tax before applying the 20%.

Good luck.

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