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FAQs regarding SEPs

 

These frequently asked questions and answers are provided for general information only and should not be cited as any type of legal authority. They are designed to provide the user with information required to respond to general inquiries. Due to the uniqueness and complexities of Federal tax law, it is imperative to ensure a full understanding of the specific question presented, and to perform the requisite research to ensure a correct response is provided.

The freely available Adobe Acrobat Reader software is required to view, print, and search the questions and answers listed below.

 

General
Participation
Contributions
Distributions
Loans
Investments
Have a Question?

 



General

  1. What is a SEP?
  2. Do I qualify to set up a SEP?
  3. If I have a SEP, can I also have other retirement plans?
  4. If I am employed but also have income from self-employment, can I set up a SEP?

 

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Participation

  1. Who is an eligible employee?
  2. What is an example of the 3 of 5 rule?
  3. Are there employees that may be excluded?
  4. What happens if an employee elects not to participate?

 

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Contributions

  1. How much may I contribute to a SEP?
  2. What is considered compensation? Are bonuses and overtime included?
  3. How much may I contribute for myself if I am self-employed?
  4. Must I contribute the same percentage of salary/wages for all participants?
  5. Can catch-up contributions be made to a SEP?
  6. Are there other limits on contributions?
  7. Can I still contribute to a SEP if one of my participants or I am over age 70 1/2?
  8. Do I have to contribute to the SEP every year?
  9. Do I have to make a contribution for a participant who is no longer employed on the last day of the year?
  10. What is the timeframe for depositing contributions into SEP-IRAs?
  11. Are employer contributions taxable to my employees?
  12. What are the consequences to my employees and me if I make excess contributions?
  13. Do I still have to fund my SEP in the year of termination?

 

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Distributions

  1. Can a SEP-IRA be rolled over into a qualified retirement plan (e.g., 401(k), profit-sharing, etc.)?
  2. Can a SEP-IRA accept rollovers from other plans?
  3. Are in-service distributions allowed from a SEP?
  4. Are hardship distributions allowed from a SEP?
  5. Must distributions be made to participants if they are over 70 1/2, if they are still working? What about to the owner of the company?
  6. How much do I have to take out of my IRA at age 70 1/2?
  7. If I cash in an IRA account before age 59 1/2, what forms do I need to fill out?
  8. Can the 10% additional tax for an early withdrawal from an IRA be deducted in the Adjusted Gross Income section of Form 1040 as a penalty on early withdrawal of savings?

 

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Loans

  1. Can I rollover into my SEP-IRA the remaining loan balance I have from my retirement plan and make the loan payments to my SEP-IRA instead of the other plan?
  2. My bank refuses to give me a loan from my IRA-based plan - isn't it required to allow loans?

 

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Investments

  1. Are there any restrictions on the things I can invest my IRA in?
  2. Are the basic investment rules different for SEPs and SIMPLE-IRA plans?
  3. Can I deduct losses in my IRA accounts on my income tax return?

 

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Have a Question?

If I have questions concerning SEPs, where do I go for help?

You may direct your technical and procedural questions concerning retirement plans to us in a variety of ways.

Call:

TE/GE Customer Account Services at (877) 829-5500 (toll-free number).

Telephone representatives will provide assistance with basic EP questions such as basic filing requirements and due date for Form 5500, status of pending determination letter applications and responding to notices.  Questions beyond the scope of our telephone representatives will be written up as a referral to be answered by an Employee Plans Specialist within 15 days.

In addition to your question, the following will be needed:

  • Your name
  • Telephone number
  • Best time to call
  • Address

You will be given a "reference number" that identifies the referral. 
If you are calling regarding specific technical guidance (e.g., Revenue Procedure, Notice, Regulation), please indicate the specific guidance and its author and your request will be forwarded.  Please be aware that telephone representatives are not permitted to give out e-mail addresses of IRS employees.

Write:

Internal Revenue Service
TE/GE Division, Correspondence Unit
P.O. Box 2508
Cincinnati, OH 45201

E-mail:

RetirementPlanQuestions@irs.gov
 

Due to disclosure laws, account-related questions cannot be answered via e-mail.  If you are e-mailing regarding specific technical guidance (e.g., Revenue Procedure, Notice, Regulation), please indicate the specific guidance and its author and your request will be forwarded.

Note: All questions submitted via e-mail must be responded to via telephone, so please remember to include your phone number in your message.

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Page Last Reviewed or Updated: 16-Sep-2013