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aes07
March 20, 2019

SEP Contributions with an S-Corp (Dividends and W2)

  • March 20, 2019
  • 1 reply
  • 0 views

Hello - We're an S-Corp.  This year it passed down $60,000 to us.  We also W2'd ourselves $20,000. What is our maximum SEP contribution for his year?  $5,000 or $20,000?  Thank you

    1 reply

    john-pero
    john-pero
    March 21, 2019

    $5k. the lesser of $55k or 25% of compensation.

     

    What kind of business are you in that "reasonable wages" as commensurate with industry and job description only pays you $10/hour based on 40 hours x 52 weeks and distribution of 3x that? Only the irs is the final authority but to me sounds as if you should flip-flop the two. With $60k of W2 you could triple the SEP, which also would reduce net passthrough profit by $10k, which at a 20% marginal tax rate is worth an additional $2k in your pocket

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