Can I use estimated net income to make SEP IRA contributions at the beginning of the year?
July 10, 2002
Subject: SEP IRA contributions
From: Patti Claiborn
Date: Sun, 9 Jun 2002
I know that it's more beneficial to make IRA contributions at the beginning of the tax year as your income is compounded & deferred for a longer time. What about SEP IRA's? Can the self-employed make those contributions based on an estimated net income at the beginning of the year? Can they then be adjusted after actual net income is computed?
Date: 28 Jun 2002
Yes, but it can be complicated to compute the correct amount to withdraw if the contribution was too large. I had a situation recently with a taxpayer who is filing a late income tax return, and the income from his business was less than originally estimated. This would be a real pickle if he made a contribution based on the initial estimate.
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