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Author: ptsurmr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: (SEP)IRA - Reporting Year of Contribution Date: 2/25/2001 10:43 PM
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This question is about a SEP-IRA contribution in particular, but I think it applies for any IRA contribution...

I recently moved my SEP-IRA from one broker to another. Over the last couple of years I have made my final SEP-IRA contribution in Jan or February of the calendar year following the current tax year. This year was not different.

In February 2001 (before filing my year 2000 tax returns) I made my final tax year 2000 contribution. I included my customary note to the broker indicating that I would like this contribution to count as a tax year 2000 contribution, and to call me if they had any problems.

Well, previous broker never had a problem. My statement would indicate the contribution for the preceding calendar year. New broker, however, says that they will not do this, nor is it necessary. New broker indicates that they will report this contribution to the IRS as having been received in 2001, and that they do not know how the IRS will become aware that it is really for my tax year 2000 (something about form 5498, pg 43, indicates that the broker is obligated to report the deposit in the calendar year it was received).

Does this sound kosher? Doesn't the IRS match what I report I contributed for the tax year against what my broker indicates they received? What if next year, during 2001, I contribute the max allowable to this SEP-IRA. Then the broker will be reporting these max allowable contributions PLUS the earlier tax year 2000 contribution (made in 2/2001), pushing my total calendar year contributions beyond the max allowable tax year contributions. This is surely a red flag, no?

In summary, is the reporting method utilized by the new broker acceptable (even though it disagrees with how I will be reporting my contributions)?

Thanks!
PtSurMr
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Author: Helter Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47173 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/26/2001 6:41 AM
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My SEP statements show the contributions on each statement, so far I see:
SEP Contributions 1999
SEP Contirubtions for 1999 received in 2000
SEP Contributions 2000
(or something really close to that)

So this satisfies both indicating the tax year and the year of receipt. I'd keep fighting with your broker - it would bother me for years looking at statements that aren't exactly how I expect them to be.

Keep on fighting,
Helter

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Author: krkistler One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47182 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/26/2001 10:19 AM
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I recently moved my SEP-IRA from one broker to another. Over the last couple of years I have made my final SEP-IRA contribution in Jan or February of the calendar year following the current tax year. This year was not different.

In February 2001 (before filing my year 2000 tax returns) I made my final tax year 2000 contribution. I included my customary note to the broker indicating that I would like this contribution to count as a tax year 2000 contribution, and to call me if they had any problems.

Well, previous broker never had a problem. My statement would indicate the contribution for the preceding calendar year. New broker, however, says that they will not do this, nor is it necessary. New broker indicates that they will report this contribution to the IRS as having been received in 2001, and that they do not know how the IRS will become aware that it is really for my tax year 2000 (something about form 5498, pg 43, indicates that the broker is obligated to report the deposit in the calendar year it was received).


I got the same story from my broker (Schwab), (they even sent me a special pamphlet to explain the situation) Apparently, the IRS reporting rules are different for SEP-IRAs. They report the year in which the contributions are made. Just keep your own records straight and you should be fine. (or am I being overly optimistic?)





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Author: ptsurmr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47211 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/26/2001 3:17 PM
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Helter writes:
My SEP statements show the contributions on each statement, so far I see:
SEP Contributions 1999
SEP Contirubtions for 1999 received in 2000
SEP Contributions 2000
(or something really close to that)

So this satisfies both indicating the tax year and the year of receipt. I'd keep fighting with your broker - it would bother me for years looking at statements that aren't exactly how I expect them to be.

Keep on fighting


Helter, the statements you describe is similar to how my previous broker (TD Waterhouse) used to report my SEP IRA contributions. I get the impression that fighting my new broker (Brown & Co) will do no good, unless I can point them to a specific IRS form/publication that indicates they must report the contributions as I requested.

I like Brown & Co for a myriad of other reasons, so I really do not want to fire them over this single point. I will do so, however, if I find that their preferred reporting style will get me in trouble with the IRS. Thus the question: will their method of reporting, which disagrees with my tax return, cause me any problems with the IRS?

PtSurMr

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Author: ptsurmr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47217 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/26/2001 3:24 PM
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krkistler writes:
I got the same story from my broker (Schwab), (they even sent me a special pamphlet to explain the situation) Apparently, the IRS reporting rules are different for SEP-IRAs. They report the year in which the contributions are made. Just keep your own records straight and you should be fine. (or am I being overly optimistic?)

krkistler, thanks for letting me know I am not alone. As a matter of fact, the broker rep (IRA specialist) I spoke with over the phone mentioned that he gets asked this question 25 times a week!

I have no real problem with keeping my records straight. I would prefer the custodian report my contributions as I have requested. However if the IRS allows them to report my contributions as the custodian suggests, and simultaneously allows me to report my contributions for the year I intend, then I suppose this is ok.

The big question I have is: If the custodian is correct, and they and I can each report the contributions for different years, how does the IRS reconcile these numbers? Do they even try?

PtSurMr

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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47283 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/27/2001 12:11 AM
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Well, previous broker never had a problem. My statement would indicate the contribution for the preceding calendar year. New broker, however, says that they will not do this, nor is it necessary.

New broker is a yutz. While searching for a competent trustee to move your accounts to, see if you can get them to fix it. I hope your designations were in writing, in which case you can report your contributions for the appropriate year, but you can expect IRS to inquire why your return differs from your custodian's reporting.

Phil Marti
VITA Volunteer

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Author: ptsurmr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47294 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/27/2001 1:18 AM
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Phil graciously provides:
New broker is a yutz. While searching for a competent trustee to move your accounts to, see if you can get them to fix it. I hope your designations were in writing, in which case you can report your contributions for the appropriate year, but you can expect IRS to inquire why your return differs from your custodian's reporting.

Thanks for the info Phil. I will work on getting them to fix it, but without a specific IRS form/pub reference I think I stand little chance. As I type this post, I am also downloading Form 5498. This is the form the trustee's rep quoted when I asked for reference supporting their reporting position. If you know of a specific form/pub that will help me support my case, I sure would appreciate your insight.

Yes, I did put my request in writing. However it was just a hand-written "sticky" note included with the contribution. No photocopy ;(

I DID write "Tax Year 2000 SEP contribution" in the memo field of the check. Is this sufficient?

In any event, I would just as soon not have the IRS inquire. Not that I have anything to hide, rather I just do not really have the time to address unnecessary inquiries (along with the usual required paperwork).

If it comes to it, how is this for a real kludge. Note: I have not yet filed my year 2000 return.

I go ahead and record my contribution to the new broker as a year 2001 contribution (seems like they give me no other choice). I then open a new SEP with my original broker (the one I know can record the contribution properly) and send them a check for the balance of my 2000 SEP contribution. If I decide to stay with the yutz, I can roll the new SEP into the yutz' SEP. If I decide to can the yutz, I roll the yutz' SEP into the new SEP.

Other than being a PITA, does this kludge sound kosher?

Thanks again,
PtSurMr

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Author: ptsurmr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47295 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/27/2001 1:36 AM
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Hey Phil,

I just downloaded the document the broker's IRA rep cited as the basis for their reporting standards -- Form 5498 (23K pdf file from http://ftp.fedworld.gov/pub/irs-pdf/f5498_00.pdf).

Page 4 has the instructions for reporting SEP contributions (Box 7):

Box 7. Shows simplified employee pension (SEP) contributions made in 2000, including contributions made in 2000 for 1999, but not including contributions made in 2001 for 2000. If made by your employer, do not deduct on your income tax return. If you made the contributions as a self-employed person (or partner), they may be deductible. See Pub. 560.

Sounds like the yutz may be reporting the contributions as they should. Am I reading this correctly? If so, how the heck does the IRS reconcile my contributions with what has been reported?

Thanks!
PtSurMr

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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47298 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/27/2001 4:31 AM
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Sounds like the yutz may be reporting the contributions as they should. Am I reading this correctly?

Live and learn. Yes, I think you're reading it correctly (and I was reading it incorrectly). You'll find the specific instruction to the trustee on page R-11 of this document: http://ftp.fedworld.gov/pub/irs-pdf/i1099r00.pdf

Since you noted the year on your check and will properly report your contribution on line 29 of your year 2000 1040, I don't see anything else you can do. There's no doubt that the 5498 doesn't determine the year for which the contribution was made, so you should be just fine.

I'm not going to say this won't result in an IRS inquiry down the road. On the other hand, IRS may realize that absolutely accurate reporting by the trustee may not be possible since the 5498 for contributions has to be issued in May but SEP contributions can be made through the extended due date of your return, IIRC.

Sorry to have added to the confusion.

Phil Marti

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Author: ptsurmr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47323 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/27/2001 11:51 AM
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pmarti writes:
Live and learn. Yes, I think you're reading it correctly (and I was reading it incorrectly). You'll find the specific instruction to the trustee on page R-11 of this document: http://ftp.fedworld.gov/pub/irs-pdf/i1099r00.pdf

Since you noted the year on your check and will properly report your contribution on line 29 of your year 2000 1040, I don't see anything else you can do. There's no doubt that the 5498 doesn't determine the year for which the contribution was made, so you should be just fine.

I'm not going to say this won't result in an IRS inquiry down the road. On the other hand, IRS may realize that absolutely accurate reporting by the trustee may not be possible since the 5498 for contributions has to be issued in May but SEP contributions can be made through the extended due date of your return, IIRC.

Sorry to have added to the confusion.


Phil, I think you hit the nail on the head in the bolded part above. The trustee rep indicated that the reporting requirements may have been changed (recently?) because it become too onerous of a burden for them to file ammended reports when SEP contributions came trickling in around June - Oct, as folks filed extensions and made contributions.

BTW and FYI: I have the utmost respect for your opinion. As a matter of fact, it was your opinion that spurred me to prompt action in downloading the f5498. Furthermore, your subsequent confirmation of my subsequent understanding is worth far more than I paid for it. Thank you for all you do here!

PtSurMr

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Author: yankeesmyteam Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47360 of 121061
Subject: Re: (SEP)IRA - Reporting Year of Contribution Date: 2/27/2001 8:20 PM
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YOu have to write on your check which year the contribution is for. i had the same problem with waterhouse. i made a contribution in calendar year 2000 for 1999 tax year. I had to go back and have them recharacterize it. Now on all checks i write the year I want it credited to.

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