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For the past two years DW, self-employed, has had a SEP that she contributes to when we file our joint tax return. But this year, she is seeing some buying opportunites right now and would like to fund the SEP now. I'm supposing this is entirely possible and that there is no need to wait. (Right?) The only problem I can think of is that if we overestimate her income for this year, and then over-contribute to the SEP. (That sounds pretty bad, and I don't know what whould happen then... I suppose most of the cash contribution would be in equities by the time we found out.) So, the plan is to make a lowball estimate (maybe using just the money she's made so far this year, as if she'd have no income for the remainder of the year), and then make a contribution based on that amount. I'm thinking that when she figures out her income later for the entire year, she will be able to make another contribution for 2001 that would bring her up to her limit for the year. (Right again?) Any other complications or things that I should pay attention to? TIA for any help or guidance.
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For the past two years DW, self-employed, has had a SEP that she contributes to when we file our joint tax return. But this year, she is seeing some buying opportunites right now and would like to fund the SEP now. I'm supposing this is entirely possible and that there is no need to wait. (Right?)

That's right. A complete explanation and rules for SEPs are in IRS Publication 590, available at the IRSA web site.

The only problem I can think of is that if we overestimate her income for this year, and then over-contribute to the SEP. (That sounds pretty bad, and I don't know what whould happen then... I suppose most of the cash contribution would be in equities by the time we found out.)

What happens is simple. If you have a decent administrator, like Vanguard, you simply say that so much of such and such a contribution was an excess contribution and you want to withdraw it plus all related gains. Vanguard will calculate the amount. As long as you accomplish the withdrawl prior to the due date plus extensions on the return there's no penalty. Remember, the withdrawl has to be accomplished prior to filing. It's reported on Form 8606.

So, the plan is to make a lowball estimate (maybe using just the money she's made so far this year, as if she'd have no income for the remainder of the year), and then make a contribution based on that amount. I'm thinking that when she figures out her income later for the entire year, she will be able to make another contribution for 2001 that would bring her up to her limit for the year. (Right again?)

That's probably the best plan. It keeps you from messing with the Form 8606.

Any other complications or things that I should pay attention to? TIA for any help or guidance.

Nope. Seems you have a handle on it. Just remember when you read Pub 590 that as DW is self employed, she becomes both the employer and employee. S read the rules on excess contributions as if she were an employer. Good luck.
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