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August 14, 2019
Question

Self-Emplayed

  • August 14, 2019
  • 2 replies
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I'm a realtor and my financial guy had me make 2 deposits in my SEP account last year. One as an employer and one as a realtor. Turbo Tax says my maximum to deposit is 6500.00. How do I enter the deductions in TurboTax?

    2 replies

    Critter
    Employee
    August 17, 2019

    If you are self employed then you are NOT an employee or employer ... seek local professional assistance to sort this out. 

    Carl11_2
    Employee
    August 18, 2019

    If self-employed and your business type is sole proprietorship or single member LLC (which is most likely) then your business is considered a disregarded entity by the IRS. For either of those two business types you the owner of the business can not be an "employee" of the business. So any contributions to a retirement account are entered under the Deductions & Credits tab in the Retirement & Investments section.

    Now if your single member LLC has filed form 8832 with the IRS to be "treated like an S-Corp" for tax purposes, then a completely different set of rules apply to you and your business. Basically, if the 8832 was filed then in order for your business to be "treated like an S-Corp", it must "act" like an S-Corp. This means the business must follow all the laws, rules and regulations set for by the IRS and your state for S-Corps. This includes the requirement that you must take a minimum taxable "draw" from the business every year. In addition to that, you can also be an employee of that company and the S-Corp can do things such as provide a 401(k) or SEP IRA to it's employees.

    Finally, if the business did "in fact" file the 8832 to be "treated like an S-Corp" then there's two things of major importance here.

    1. Absolutely nothing concerning the business will be filed on a SCH C at all, with no exceptions.

    2. The business must file it's own physically separate tax return on IRS Form 1120-S.

    The business tax return needs to be completed and file before you can even start your personal tax return. That's because the business will issue all owners a K-1 which is absolutely required for your personal tax return. If you are also an employee of that business, then you will also be issued a W-2 which would include all SEP IRA contributions in box 12 and the contributed amount which includes both your contribution from wages as well as the employer/company contributions would not be included in box 1 of that W-2.

    Another possible issue if this is your case, is that if the LLC/S-Corp did not file for an extension, then your late filing penalties are adding up. Corporate returns were due March 15th, and it's $200 per month for each month it's late. So as it stands now if you didn't file for a corporate extension your late fee is $1000 and increased another $200 if not filed by Sept 15th.

    If a corporate extension was filed, then your extended deadline to file is Sept 15th.

    Overall I get the impression that you've never dealt with business taxes before of any type. So I would suggest you seek professional help at this late stage in the game and then try again next year well before your filing deadlines.