Solutions 4 Financial Independence: 08/09/18

Published: Aug. 9, 2018 at 7:17 AM EDT
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Question: I am a self-employed medical professional and I over contributed to SEP. Am I in trouble?

Answer (John Halterman, Beacon Wealth Management): “IRS rules are super complex, especially when it comes to retirement plans. Especially if you’re a self-employed person because you are only allowed to contribute up to a max of 25% or $55,000, up to an earnings of $275,000. So that in itself is a little bit complex. These things can definitely happen, but relax. You don’t have to worry, the IRS does allow for corrective actions so you can fix this.”

Question: How do we go about fixing this?

Answer (John Halterman, Beacon Wealth Management): “It is like all problems with the IRS, it is basically re-filing. What you have to do is the IRS has different forms for different types of retirement plans and you have to go and complete that form, acknowledge the mistake and then take corrective action.

Now, they may charge you a small penalty. But it is not going to be so much that it is going to take every penny you have. Definitely it is not something you want to do, but it is definitely something that can be corrected and it is definitely not something I would worry about. Fix it, move onto the next year.

What I tell a person is, as you are saving money throughout the year you have to look at these numbers. When I say look at these numbers, you have to look at what you are making relative to how much you are contributing because the IRS does have a lot of different limitations and rules so you have to make sure you follow those throughout the year.”