SEP IRA Retirement Contribution Bookkeeping Question

SEP IRA Retirement Contribution

SEP IRA Retirement Contribution

I have a questions about SEP IRAs retirement plans that are similar to 401Ks except that the company makes 100% of the contributions.

There are numerous requirements that are well documented elsewhere on the Internet, but I can't seem to find any assistance regarding how to handle SEP IRA contributions from a bookkeeping standpoint.

It seems like there are two main scenarios:

* A SEP IRA contribution made for the current fiscal year

* A SEP IRA contribution made for the previous fiscal year

In the first case, my assumption is that I'd create a "SEP IRA Contributions" expense account and debit it for any contributions made for the current fiscal year. Is that correct?

In the second case, my assumption is that I should use a different expense account for contributions made for the previous fiscal year, maybe call it "Previous FY SEP IRA Contributions"

Am I even close here? Are there standard names that should be given to these accounts?

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Jan 20, 2024
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starstarstarstarstar 		Current Year SEP IRA Contributions
by: BB

Let's break it down in simple terms:

SEP IRA Contribution for the Current Fiscal Year:

Yes, you're on the right track. You can create an expense account named "SEP IRA Contributions."
Think of it like a special fund where the company puts money aside for employees' future. You'd debit this account when making contributions.
SEP IRA Contribution for the Previous Fiscal Year:

Your idea of a separate account, like "Previous FY SEP IRA Contributions," is spot on!
This helps keep things organized. When contributing for the previous year, debit this specific account.
Imagine it like two jars—one for this year's savings and another for last year's. By having separate jars (accounts), you can see exactly where each contribution is going.

In bookkeeping terms:

Debit means you're increasing an expense account, like putting money into a jar.
Credit would be the other side of the entry, like taking money out of the company's checking account.

So, for both scenarios, you'd debit the respective SEP IRA Contributions accounts, showing that money is being set aside for retirement.

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Wrong Form of the Social Security

by irene

There are 2 business and I have been doing my income tax by a bookkeeper. The other business went with another accountant, and he said that he had found a form of that business with his social security that he had made that money. I was under the assumption that it was all in my name. I paid income tax on that form, form because I had placed that bid and every time they paid for that work and paid income tax on it. Now the account says that it is all wrong. What is my liability on that?

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Jan 20, 2024
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starstarstarstarstar 		Business Ownership and Tax Concerns
by: BB

It sounds like there might be a mix-up or misunderstanding regarding the ownership and tax reporting of the businesses. Here are some steps you might consider:

Clarify Ownership:

Review any legal documents, contracts, or agreements that establish ownership of the businesses.
Confirm with the other party involved and gather evidence supporting your ownership.
Communicate with Accountant:

Reach out to the accountant who raised the concern.
Share your understanding of the ownership structure and inquire about the details they've uncovered.
Consult a Tax Professional:

Given the complexity, consider seeking advice from a tax professional or CPA.
They can guide you through the specific tax implications and help resolve any discrepancies.
Document Everything:

Keep a detailed record of all communications, documents, and transactions related to the businesses.

This documentation can serve as evidence in case of any disputes or audits.
Legal Assistance:

If the issue persists and becomes complicated, consult with a business attorney.

They can help you navigate any legal aspects and protect your interests.

Remember, the specifics of your situation may require professional advice tailored to your circumstances. It's crucial to address these matters promptly and accurately to avoid any potential legal or financial consequences.

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