Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Amend A 2011 Tax Return

Back Taxes HelpHow To Amend 2012 Tax ReturnUnemployed Tax FilingFree Online State Tax Filing1040eTurbotaxIrs Forms 10402013 Irs 1040xFiling Late Taxes For 2011Filing A Tax AmmendmentFile 2010 Taxes Online LateWhere Can I File Free State TaxesEz Forms 2013Federal Income Tax Rates 2012Free State Tax FilingFile State Taxes Free 2013Filing Late Tax ReturnsTurbotax 2012 Tax Return1040ez FreeFile Past Taxes OnlineFree State Tax Filing 2012File Tax Extension 2011H&r Block State TaxesForm 10401040x Form And InstructionsFree Turbo Tax Filing2011 Federal Tax Form 1040ez2012 1040x1040nr Instructions 2012H&r Block Advantage E FileWww Irs GovOnline Tax Filing 20121040ez 2010 InstructionsFree Filing For 2012 TaxesH And R Block FreeEzformH&r Tax CutHow Do I File A 2012 Tax Return1040a 2011 Tax FormOne Source Talent Chicago

Amend A 2011 Tax Return

Amend a 2011 tax return Index A Aircraft, Cars, Boats, and Aircraft Annuities, Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Annuity contracts, Certain Life Insurance and Annuity Contracts Antiques, Paintings, Antiques, and Other Objects of Art Appraisals, Appraisals Cost of, Cost of appraisals. Amend a 2011 tax return IRS review of, Internal Revenue Service Review of Appraisals Qualified appraisal, Qualified Appraisal Appraiser, Qualified appraiser. Amend a 2011 tax return Art objects, Paintings, Antiques, and Other Objects of Art Valued at $20,000 or more, Art valued at $20,000 or more. Amend a 2011 tax return Valued at $50,000 or more, Art valued at $50,000 or more. Amend a 2011 tax return Assistance (see Tax help) B Boats, Cars, Boats, and Aircraft Bonds, Stocks and Bonds Books, Books. Amend a 2011 tax return Business, interest in, Interest in a Business C Cars, Cars, Boats, and Aircraft Clothing, used, Used Clothing, Deduction over $500 for certain clothing or household items. Amend a 2011 tax return Coins, Coin collections. Amend a 2011 tax return Collections, Collections Books, Books. Amend a 2011 tax return Coins, Coin collections. Amend a 2011 tax return Stamps, Stamp collections. Amend a 2011 tax return Comments on publication, Comments and suggestions. Amend a 2011 tax return Comparable properties, sales of, Sales of Comparable Properties, Selection of Comparable Sales Conservation contribution, Conservation purposes. Amend a 2011 tax return Cost, Cost or Selling Price of the Donated Property Rate of increase or decrease, Rate of increase or decrease in value. Amend a 2011 tax return Terms of purchase or sale, Terms of the purchase or sale. Amend a 2011 tax return D Date of contribution, Date of contribution. Amend a 2011 tax return Deductions of more than $5,000, Deductions of More Than $5,000 Deductions of more than $500,000, Deductions of More Than $500,000 F Fair market value, What Is Fair Market Value (FMV)? Comparable properties, sales of, Sales of Comparable Properties Cost, Cost or Selling Price of the Donated Property Date of contribution, Date of contribution. Amend a 2011 tax return Determining FMV, Determining Fair Market Value Opinions of experts, Opinions of Experts Problems in determining FMV, Problems in Determining Fair Market Value Replacement cost, Replacement Cost Form 8283, Form 8283 Formulas, use in valuing property, Determining Fair Market Value Free tax services, How To Get Tax Help Future events, effect on value, Future Events H Help (see Tax help) Historic building, Building in registered historic district. Amend a 2011 tax return Household goods, Household Goods, Deduction over $500 for certain clothing or household items. Amend a 2011 tax return I Interest in a business, Interest in a Business Inventory, Inventory IRS review of appraisals, Internal Revenue Service Review of Appraisals Exception, Exception. Amend a 2011 tax return J Jewelry and gems, Jewelry and Gems L Life insurance, Certain Life Insurance and Annuity Contracts M Market conditions, effect on value, Unusual Market Conditions More information (see Tax help) O Opinions of experts, Opinions of Experts P Paintings, Paintings, Antiques, and Other Objects of Art Partial interest, Partial Interest in Property Not in Trust Past events, effect on value, Using Past Events to Predict the Future Patents, Patents Penalties: Imposed on appraiser, Appraiser penalties. Amend a 2011 tax return Imposed on taxpayer, Penalty Publications (see Tax help) Publicly traded securities, Publicly traded securities. Amend a 2011 tax return Q Qualified appraisal, Qualified Appraisal Qualified appraiser, Qualified appraiser. Amend a 2011 tax return Qualified conservation contribution, Qualified Conservation Contribution R Real estate, Real Estate Remainder interests, Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Replacement cost, Replacement Cost Reversion interests, Annuities, Interests for Life or Terms of Years, Remainders, and Reversions S Stamps, Stamp collections. Amend a 2011 tax return Statement of Value, Exception. Amend a 2011 tax return Stocks, Stocks and Bonds Suggestions for publication, Comments and suggestions. Amend a 2011 tax return T Tax help, How To Get Tax Help Taxpayer Advocate, Contacting your Taxpayer Advocate. Amend a 2011 tax return TTY/TDD information, How To Get Tax Help U Used clothing, Used Clothing, Deduction over $500 for certain clothing or household items. Amend a 2011 tax return V Valuation of property, Valuation of Various Kinds of Property Annuities, Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Cars, boats, and aircraft, Cars, Boats, and Aircraft Collections, Collections Household goods, Household Goods Interest in a business, Interest in a Business Inventory, Inventory Jewelry and gems, Jewelry and Gems Life insurance and annuity contracts, Certain Life Insurance and Annuity Contracts Paintings, antiques, art objects, Paintings, Antiques, and Other Objects of Art Partial interest in property, Partial Interest in Property Not in Trust Real estate, Real Estate Remainder interests, Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Reversion interests, Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Stocks and bonds, Stocks and Bonds Terms of years, Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Used clothing, Used Clothing Valuation of property: Patents, Patents Prev  Up     Home   More Online Publications
Print - Click this link to Print this page

LP 59 Frequently Asked Questions (FAQs)

What is the notice telling me?

We previously sent a notice of levy to you to collect money from the taxpayer named in the letter, but have received no response.

What do I have to do?

If you previously responded, complete the information and mail it to us in the enclosed envelope. You are legally responsible for responding to the levy and must send us the amount you owe the taxpayer(s), not to exceed the amount on the levy. Failure to do so could result in you being personally liable to us for the amount you owe the taxpayer. A penalty of up to 50% of the tax owed may also be imposed.

How much time do I have?

Respond at your earliest convenience by correspondence or you may call the phone number provided on the letter for additional assistance or to let us know that you do not owe funds to this taxpayer.

What happens if I don't respond to the levy?

You are legally responsible for responding to the levy and must send us the amount you owe the taxpayer(s), not to exceed the amount on the levy. Failure to do so could result in you being personally liable to us for the amount you owe the taxpayer. A penalty of up to 50% of the tax owed may also be imposed.

Who should I contact?

Either call the number provided in the letter or respond in writing using the enclosed envelope.

What if I don't agree or have already taken corrective action?

Contact us by phone to resolve any concerns or outstanding issues related to the levy you received previously.

Page Last Reviewed or Updated: 03-Feb-2014

The Amend A 2011 Tax Return

Amend a 2011 tax return 2. Amend a 2011 tax return   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. Amend a 2011 tax return How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. Amend a 2011 tax return Deferral percentage. Amend a 2011 tax return Employee compensation. Amend a 2011 tax return Compensation of self-employed individuals. Amend a 2011 tax return Choice not to treat deferrals as compensation. Amend a 2011 tax return Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. Amend a 2011 tax return Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. Amend a 2011 tax return S. Amend a 2011 tax return Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. Amend a 2011 tax return Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. Amend a 2011 tax return A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. Amend a 2011 tax return SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). Amend a 2011 tax return A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). Amend a 2011 tax return Eligible employee. Amend a 2011 tax return   An eligible employee is an individual who meets all the following requirements. Amend a 2011 tax return Has reached age 21. Amend a 2011 tax return Has worked for you in at least 3 of the last 5 years. Amend a 2011 tax return Has received at least $550 in compensation from you in 2013. Amend a 2011 tax return This amount remains the same in 2014. Amend a 2011 tax return    You can use less restrictive participation requirements than those listed, but not more restrictive ones. Amend a 2011 tax return Excludable employees. Amend a 2011 tax return   The following employees can be excluded from coverage under a SEP. Amend a 2011 tax return Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Amend a 2011 tax return Nonresident alien employees who have received no U. Amend a 2011 tax return S. Amend a 2011 tax return source wages, salaries, or other personal services compensation from you. Amend a 2011 tax return For more information about nonresident aliens, see Publication 519, U. Amend a 2011 tax return S. Amend a 2011 tax return Tax Guide for Aliens. Amend a 2011 tax return Setting Up a SEP There are three basic steps in setting up a SEP. Amend a 2011 tax return You must execute a formal written agreement to provide benefits to all eligible employees. Amend a 2011 tax return You must give each eligible employee certain information about the SEP. Amend a 2011 tax return A SEP-IRA must be set up by or for each eligible employee. Amend a 2011 tax return Many financial institutions will help you set up a SEP. Amend a 2011 tax return Formal written agreement. Amend a 2011 tax return   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. Amend a 2011 tax return You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. Amend a 2011 tax return However, see When not to use Form 5305-SEP, below. Amend a 2011 tax return   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. Amend a 2011 tax return Keep the original form. Amend a 2011 tax return Do not file it with the IRS. Amend a 2011 tax return Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. Amend a 2011 tax return See the Form 5305-SEP instructions for details. Amend a 2011 tax return If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. Amend a 2011 tax return When not to use Form 5305-SEP. Amend a 2011 tax return   You cannot use Form 5305-SEP if any of the following apply. Amend a 2011 tax return You currently maintain any other qualified retirement plan other than another SEP. Amend a 2011 tax return You have any eligible employees for whom IRAs have not been set up. Amend a 2011 tax return You use the services of leased employees, who are not your common-law employees (as described in chapter 1). Amend a 2011 tax return You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. Amend a 2011 tax return An affiliated service group described in section 414(m). Amend a 2011 tax return A controlled group of corporations described in section 414(b). Amend a 2011 tax return Trades or businesses under common control described in section 414(c). Amend a 2011 tax return You do not pay the cost of the SEP contributions. Amend a 2011 tax return Information you must give to employees. Amend a 2011 tax return   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. Amend a 2011 tax return An IRS model SEP is not considered adopted until you give each employee this information. Amend a 2011 tax return Setting up the employee's SEP-IRA. Amend a 2011 tax return   A SEP-IRA must be set up by or for each eligible employee. Amend a 2011 tax return SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. Amend a 2011 tax return You send SEP contributions to the financial institution where the SEP-IRA is maintained. Amend a 2011 tax return Deadline for setting up a SEP. Amend a 2011 tax return   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. Amend a 2011 tax return Credit for startup costs. Amend a 2011 tax return   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. Amend a 2011 tax return For more information, see Credit for startup costs under Reminders, earlier. Amend a 2011 tax return How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. Amend a 2011 tax return If you are self-employed, you can contribute to your own SEP-IRA. Amend a 2011 tax return Contributions must be in the form of money (cash, check, or money order). Amend a 2011 tax return You cannot contribute property. Amend a 2011 tax return However, participants may be able to transfer or roll over certain property from one retirement plan to another. Amend a 2011 tax return See Publication 590 for more information about rollovers. Amend a 2011 tax return You do not have to make contributions every year. Amend a 2011 tax return But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). Amend a 2011 tax return When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. Amend a 2011 tax return Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. Amend a 2011 tax return A SEP-IRA cannot be a Roth IRA. Amend a 2011 tax return Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Amend a 2011 tax return Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. Amend a 2011 tax return If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. Amend a 2011 tax return Participants age 70½ or over must take required minimum distributions. Amend a 2011 tax return Time limit for making contributions. Amend a 2011 tax return   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. Amend a 2011 tax return Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. Amend a 2011 tax return Compensation generally does not include your contributions to the SEP. Amend a 2011 tax return The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. Amend a 2011 tax return Example. Amend a 2011 tax return Your employee, Mary Plant, earned $21,000 for 2013. Amend a 2011 tax return The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). Amend a 2011 tax return Contributions for yourself. Amend a 2011 tax return   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. Amend a 2011 tax return However, special rules apply when figuring your maximum deductible contribution. Amend a 2011 tax return See Deduction Limit for Self-Employed Individuals , later. Amend a 2011 tax return Annual compensation limit. Amend a 2011 tax return   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. Amend a 2011 tax return However, $51,000 is the maximum contribution for an eligible employee. Amend a 2011 tax return These limits are $260,000 and $52,000, respectively, in 2014. Amend a 2011 tax return Example. Amend a 2011 tax return Your employee, Susan Green, earned $210,000 for 2013. Amend a 2011 tax return Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. Amend a 2011 tax return More than one plan. Amend a 2011 tax return   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. Amend a 2011 tax return When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. Amend a 2011 tax return Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. Amend a 2011 tax return Tax treatment of excess contributions. Amend a 2011 tax return   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. Amend a 2011 tax return 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). Amend a 2011 tax return $51,000. Amend a 2011 tax return Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. Amend a 2011 tax return For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. Amend a 2011 tax return Reporting on Form W-2. Amend a 2011 tax return   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). Amend a 2011 tax return Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. Amend a 2011 tax return If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. Amend a 2011 tax return Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. Amend a 2011 tax return Your contributions (including any excess contributions carryover). Amend a 2011 tax return 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. Amend a 2011 tax return In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. Amend a 2011 tax return Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. Amend a 2011 tax return When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. Amend a 2011 tax return The deduction for the deductible part of your self-employment tax. Amend a 2011 tax return The deduction for contributions to your own SEP-IRA. Amend a 2011 tax return The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. Amend a 2011 tax return For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. Amend a 2011 tax return To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. Amend a 2011 tax return Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Amend a 2011 tax return Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. Amend a 2011 tax return However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. Amend a 2011 tax return If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. Amend a 2011 tax return Excise tax. Amend a 2011 tax return   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. Amend a 2011 tax return For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. Amend a 2011 tax return When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. Amend a 2011 tax return If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. Amend a 2011 tax return If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. Amend a 2011 tax return Example. Amend a 2011 tax return You are a fiscal year taxpayer whose tax year ends June 30. Amend a 2011 tax return You maintain a SEP on a calendar year basis. Amend a 2011 tax return You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. Amend a 2011 tax return Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Amend a 2011 tax return For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. Amend a 2011 tax return S. Amend a 2011 tax return Return of Partnership Income; and corporations deduct them on Form 1120, U. Amend a 2011 tax return S. Amend a 2011 tax return Corporation Income Tax Return, or Form 1120S, U. Amend a 2011 tax return S. Amend a 2011 tax return Income Tax Return for an S Corporation. Amend a 2011 tax return Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Amend a 2011 tax return (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Amend a 2011 tax return , you receive from the partnership. Amend a 2011 tax return ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. Amend a 2011 tax return Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. Amend a 2011 tax return (See the Caution, next. Amend a 2011 tax return ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. Amend a 2011 tax return This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. Amend a 2011 tax return You are not allowed to set up a SARSEP after 1996. Amend a 2011 tax return However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. Amend a 2011 tax return If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. Amend a 2011 tax return Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. Amend a 2011 tax return At least 50% of your employees eligible to participate choose to make elective deferrals. Amend a 2011 tax return You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. Amend a 2011 tax return The elective deferrals of your highly compensated employees meet the SARSEP ADP test. Amend a 2011 tax return SARSEP ADP test. Amend a 2011 tax return   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. Amend a 2011 tax return A highly compensated employee is defined in chapter 1. Amend a 2011 tax return Deferral percentage. Amend a 2011 tax return   The deferral percentage for an employee for a year is figured as follows. Amend a 2011 tax return   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. Amend a 2011 tax return Employee compensation. Amend a 2011 tax return   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. Amend a 2011 tax return Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. Amend a 2011 tax return See Compensation in chapter 1. Amend a 2011 tax return Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. Amend a 2011 tax return Compensation of self-employed individuals. Amend a 2011 tax return   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. Amend a 2011 tax return   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. Amend a 2011 tax return Choice not to treat deferrals as compensation. Amend a 2011 tax return   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. Amend a 2011 tax return Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. Amend a 2011 tax return 25% of the participant's compensation (limited to $255,000 of the participant's compensation). Amend a 2011 tax return $17,500. Amend a 2011 tax return The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. Amend a 2011 tax return Cash or deferred arrangement (section 401(k) plan). Amend a 2011 tax return Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). Amend a 2011 tax return SIMPLE IRA plan. Amend a 2011 tax return In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. Amend a 2011 tax return Catch-up contributions. Amend a 2011 tax return   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Amend a 2011 tax return The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. Amend a 2011 tax return Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). Amend a 2011 tax return However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Amend a 2011 tax return The catch-up contribution limit. Amend a 2011 tax return The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Amend a 2011 tax return   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). Amend a 2011 tax return Overall limit on SEP contributions. Amend a 2011 tax return   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). Amend a 2011 tax return The same rule applies to contributions you make to your own SEP-IRA. Amend a 2011 tax return See Contribution Limits , earlier. Amend a 2011 tax return Figuring the elective deferral. Amend a 2011 tax return   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. Amend a 2011 tax return Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. Amend a 2011 tax return However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Amend a 2011 tax return Excess deferrals. Amend a 2011 tax return   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. Amend a 2011 tax return For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. Amend a 2011 tax return The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. Amend a 2011 tax return See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. Amend a 2011 tax return Excess SEP contributions. Amend a 2011 tax return   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. Amend a 2011 tax return You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. Amend a 2011 tax return If you do not notify them within this time period, you must pay a 10% tax on the excess. Amend a 2011 tax return For an explanation of the notification requirements, see Rev. Amend a 2011 tax return Proc. Amend a 2011 tax return 91-44, 1991-2 C. Amend a 2011 tax return B. Amend a 2011 tax return 733. Amend a 2011 tax return If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. Amend a 2011 tax return Reporting on Form W-2. Amend a 2011 tax return   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Amend a 2011 tax return You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Amend a 2011 tax return You must also include them in box 12. Amend a 2011 tax return Mark the “Retirement plan” checkbox in box 13. Amend a 2011 tax return For more information, see the Form W-2 instructions. Amend a 2011 tax return Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. Amend a 2011 tax return Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. Amend a 2011 tax return Distributions are subject to IRA rules. Amend a 2011 tax return Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Amend a 2011 tax return For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. Amend a 2011 tax return Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. Amend a 2011 tax return Making excess contributions. Amend a 2011 tax return Making early withdrawals. Amend a 2011 tax return Not making required withdrawals. Amend a 2011 tax return For information about these taxes, see chapter 1 in Publication 590. Amend a 2011 tax return Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. Amend a 2011 tax return Prohibited transaction. Amend a 2011 tax return   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. Amend a 2011 tax return In that case, the SEP-IRA will no longer qualify as an IRA. Amend a 2011 tax return For a list of prohibited transactions, see Prohibited Transactions in chapter 4. Amend a 2011 tax return Effects on employee. Amend a 2011 tax return   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. Amend a 2011 tax return The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. Amend a 2011 tax return Also, the employee may have to pay the additional tax for making early withdrawals. Amend a 2011 tax return Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. Amend a 2011 tax return See Setting Up a SEP , earlier. Amend a 2011 tax return Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. Amend a 2011 tax return You must also give them notice of any excess contributions. Amend a 2011 tax return For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). Amend a 2011 tax return Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. Amend a 2011 tax return For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. Amend a 2011 tax return Prev  Up  Next   Home   More Online Publications