SIMPLE IRA - Is this an excess contribution?

[retire@40]

Quote:

Originally Posted by Martha The pensiononline calculator seems to make some sense--look at the breakdown. Retire@40, what do you think?

Well, they got the SEP-IRA number correct.

[Martha]

Despite what all these varied calculators say, I am still inclined to think that gindie and you figured it out right from the beginning, so I am not arguing with you.

I don't understand how they got to 929.50. It seems like they should have taken their 923.50 number and then added in a 3% employer contribution, but what do I know.

[gindie]

FYI, here's what the folks who hold the SIMPLE say:

The employee-side contribution limit is $923.50 ($1000.00 X (1/2 SE Tax rate))

The employer contribution is a 3% match of the gross income ($1000.00 X .03%) for an employer contribution of $30.00

The total contribution in this example is $923.50 +$30.00 or $953.50. Because $953.50 is less than the gross compensation (or 100% of business income) the contribution is allowed.

I need to contact TaxCut to find out why their software is complaining.

[Martha]

Yeah! We do a better job than TaxCut, and umpteen calculators. Congratulations Gindie for being right from the get go.

[gindie]

Quote:

Originally Posted by Martha Yeah! We do a better job than TaxCut, and umpteen calculators. Congratulations Gindie for being right from the get go.

Martha -

Actually, retire@40 and I computed the 3% on the 923.50, not the $1000 gross. It's only a couple of bucks; I don't know how much the IRS will scrutinize this.

[retire@40]

Quote:

Originally Posted by gindie FYI, here's what the folks who hold the SIMPLE say: The employee-side contribution limit is $923.50 ($1000.00 X (1/2 SE Tax rate)) The employer contribution is a 3% match of the gross income ($1000.00 X .03%) for an employer contribution of $30.00

For the love of God!

When you are self-employed, the matching contribution is based on $924, not $1,000!!!

You were correct the first time.

Ask "the folks" if they have ever read IRC Sec 1402.

[Martha]

Quote:

Originally Posted by retire@40 For the love of God!

I don't blame you for your comment. With all this twisting in the wind, I misread what Gindie's plan provider said about how to calculate the 3% portion of the contribution. And the many varied answers from different plan providers are disturbing.

Quote:

When you are self-employed, the matching contribution is based on $924, not $1,000!!! You were correct the first time. Ask "the folks" if they have ever read IRC Sec 1402.

Gindie, here is a link to 26 USC 1402 that defines self employment income:

http://www.law.cornell.edu/uscode/us...2----000-.html