Message Font: Serif | Sans-Serif
No. of Recommendations: 0
There are a few things here:

1) You are not considered self-employed. You are an employee of your corporation. You are taxed on your share of the S-Corp's income (in this case 100%) and you report that income on your personal tax return (Form 1040). The S-Corp's income is NOT subject to self-employment tax.

2) For 2000, the maximum SEP contribution for an employee is 15% of the employee's compensation or $30,000--whichever is less. However, if the employee's compensation is over $170,000, the maximum contribution for the employee is $25,500.

3) Here's the tricky part: In your situation, your compensation for determining your contribution DOES NOT INCLUDE YOUR SHARE OF THE S-CORP's INCOME. For S-Corp shareholders, only W-2 wages are considered qualifying compensation.

4) SEP contributions are not subject to regular income tax, but they are subject to self-employment taxes.

Hope this helps.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.