roth sep how to contribute to financial institution 2023

Forum|Forum|2 years ago
April 4, 2024
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New in 2023, is the Roth SEP. How to contribute to a SEP Roth as I have called Chase, Vanguard , Fidelity & Charles Swab and they say that the IRS has not given them how to report so they don't offer it? What is a work around solution to this? please let me know my email is [email address removed]

Not A Product Question

Best answer by dmertz

Thanks for the feedback.

actually the point is that the Government has approved the Roth SEP.

In fact, Turbo Tax has a place to be able calculate how much you can contribute to a Roth SEP based upon 1099 NEC

Unfortunately, no institution can take the money because the IRS has not given them the reporting.

So what is the work around solution

Although the change to the tax code makes it possible for SEP plans to offer the option for the contributions to be Roth contributions, SEP plans are not required to offer the option. Unless the SEP plan agreement offers the option, a Roth SEP contribution is not permitted to be made.

Correction: If the SEP plan is established using Form 5305-SEP, the employer can offer Roth SEP contributions before Form 5305-SEP is updated

IRS Notice 2024-02: https://www.irs.gov/pub/irs-drop/n-24-02.pdf

myquestAuthor

if someone can post here the response would be great thanks

dmertz

Employee

It's somewhat pointless to ask how to report Roth SEP contribution if the SEP plan agreement doesn't allow for such a contribution.

Once plan agreements are amended to allow for Roth SEP contributions, IRS Notice 2024-02 suggests that the Roth SEP contribution would be taken as a deduction as if it was a traditional SEP contribution followed immediately by an entirely taxable Roth conversion reported on a Form 1099-R for the year in which the deposit into the designated Roth account is made.

Given the information in IRS Notice 2024-02 and because there is no limitation on making a Roth conversion from a SEP IRA, there is no reason not to make a traditional deductible SEP contribution and immediately convert it to Roth. If one has basis in nondeductible traditional IRA contributions that would result in less than the full amount of the Roth conversion being taxable, this could even result in a better taxable outcome than a directly making a Roth SEP contribution.