A relative has some self-employment income (going into a corporation she setup) and she had created a SEP IRA at Schwab where she had been making contributions. Earlier this year, I suggested that she transfer the SEP IRA to E-trade (where she already had a Traditional IRA). I had expected the SEP IRA to be transferred into a "new" SEP account at E-trade. However, I just learned that the SEP IRA funds were transferred into the existing Traditional IRA, not into a new SEP account.
Here is the critical question...can her corporation continue to make contributions on her behalf to her IRA now that it is a Traditional IRA? She wants to put the full $7,000 in for 2006 but I am not sure if she needs to open a new SEP IRA or if it is allowed to put the $7k into the Traditional IRA. Can anyone advise?
Moreover, does the IRS even allow you to transfer a SEP into a Traditional IRA? Is this a big screwup that will have tax implications? Do I need to find some way to un-conmingle the funds?
Here is the critical question...can her corporation continue to make contributions on her behalf to her IRA now that it is a Traditional IRA? She wants to put the full $7,000 in for 2006 but I am not sure if she needs to open a new SEP IRA or if it is allowed to put the $7k into the Traditional IRA. Can anyone advise?
Moreover, does the IRS even allow you to transfer a SEP into a Traditional IRA? Is this a big screwup that will have tax implications? Do I need to find some way to un-conmingle the funds?