Greetings, Helen, and welcome. You asked:<<My husband will be funding his SEP-IRA at the end of this year (for 1999). He is not sure exactly how much he can contribute tax deductable. So he will be making an educated guess. Here's the question:If he over contributes (he'll find this out once he does our taxes next year)to the SEP-IRA, what are the ramifications? Meaning the extra money, does it have to be removed from the account? Is the extra money now taxed? And lastly, can that extra money stay in the SEP-IRA accurring gains tax-deferred?>>To avoid any penalty, the excess contributions and any earnings thereon must be removed from the SEP-IRA prior to 4/17/00 (4/15 falls on a Saturday next year, so you get two extra days before your return is due). If not done before then, the excess contribution will be penalized 6% for 1999 and for each and every subsequent tax year the excess remains in the account. He may, though, pay the 6% for 1999 and use the excess as part of his allowable contribution for 2000. Alternatively, he may leave the excess in the IRA and call it part of his allowable non-SEP (or traditional) IRA contribution for 1999. He's still allowed that contribution in addition to his SEP-IRA, but it probably won't be deductible because of the AGI limits for same. For details, you should get and read IRS Publication 590, Individual Retirement Arrangements, available at http://www.irs.ustreas.gov/prod/forms_pubs/index.html.Regards..Pixy
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