SEP Contribution

captng1
captng1 Member Posts: 1 Newcomer
in General

If I earn money and pay tax on it, and after paying tax on it make a SEP contribution with that tax paid money, am I paying tax on it twice when I make a withdrawl from the SEP? My accountant tells me no..

Thanks for your help..

Answers

  • rachels
    rachels FreeTaxUSA Agent Posts: 107
    edited July 2024

    Hi captng1,

    No, you should generally not be taxed on a SEP withdrawal if you contributed with money that you already paid tax on.

    If, however, you take a deduction on your tax return for your SEP contribution, it essentially reverts to being considered a pre-tax contribution. You would then pay tax on the eventual withdrawals from the account.

    Keep in mind that any contributions to a Traditional SEP, that is a non-deductible contribution (after-tax), must be reported on Form 8606.

    Also, contribution to a Roth SEP IRA is an after-tax contribution, and the distribution is not taxable when withdrawn.  Please see this IRS page for more information:

    https://www.irs.gov/retirement-plans/plan-sponsor/simplified-employee-pension-plan-sep

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