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Old 07-25-2008, 11:52 AM   #1
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IRA Question

I have a friend who was self employed and started a SEP IRA. She is now employed and receives a W-2. Can she still participate in the SEP and add as much as 25% of her income towards the IRA or does she have to revert or rollover her SEP IRA to a traditional IRA ? Appreciate any and all responses.
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Old 07-25-2008, 11:58 AM   #2
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If she isn't earning any income from her self employment she no longer can contribute to her SEP. She doesn't have to roll it over, money there can stay where it is.

If she wants to contribute to an IRA based on her earning from her W-2 job, she should set up a traditional IRA.

The applicable publication from the IRS on SEP IRAs is: http://www.irs.gov/publications/p560/index.html
Investopedia has a nice article on SEP rules. SEP IRAs: Introduction
Also look at IRS publication 590 for traditional and roth IRAS: http://www.irs.gov/publications/p590/index.html
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Old 07-25-2008, 01:11 PM   #3
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Quote:
Originally Posted by Martha View Post
If she isn't earning any income from her self employment she no longer can contribute to her SEP. She doesn't have to roll it over, money there can stay where it is.

If she wants to contribute to an IRA based on her earning from her W-2 job, she should set up a traditional IRA.

The applicable publication from the IRS on SEP IRAs is: Publication 560 (2007), Retirement Plans for Small Business
Investopedia has a nice article on SEP rules. SEP IRAs: Introduction
Also look at IRS publication 590 for traditional and roth IRAS: Publication 590 (2007), Individual Retirement Arrangements (IRAs)

Martha is right. Your friend can also do a Roth IRA if she qualifies.........
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Old 07-28-2008, 09:06 PM   #4
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It's on a per year basis. The contribution limits are based on the annual earnings. So, if she was self employed at any time this year, she can still make her SEP IRA contribution up until her tax filing deadline...even if she's no longer self employed.

If she isn't self employed in 2008, then she can't make contributions.

It is possible to do both the SEP IRA and IRA contributions in the same year (deductibility of traditional IRA is subject to an earnings test).

There is no requirement for her to combine her IRAs.
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