SEP IRA Question: I've been told no question is stupid, so

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redbarnyard
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SEP IRA Question: I've been told no question is stupid, so

Post by redbarnyard »

the tax deadline is approaching. I am self employed and have in the past contributed to a SEP IRA. This year I have a big building project that I've been saving for and don't really have the funds to put into my SEP. Is it possible and/or am I allowed to sell some stocks in my brokerage account to fund the SEP for 2022? My gut instinct is that it isn't permitted but I thought I'd check.

Thanks
Evergreen2022
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by Evergreen2022 »

Sure, you just will owe taxes on the gains (if any) in the brokerage when you sell the shares
mhalley
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by mhalley »

This comes under the “money is fungible” doctrine.
https://learn.robinhood.com/articles/6e ... ngibility/#
sycamore
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by sycamore »

^ right.

The relevant rule is that you need $X in compensation/earned income to contribute $X to the SEP IRA. That doesn't mean that $X must literally/virtually come out of your paycheck or bank account where your paycheck was deposited to. It's not like the IRS or your IRA custodian is tracking where the money "came from."
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GMCZ71
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by GMCZ71 »

Taxable brokerage is perfect. You will probably need to transfer to your bank then transfer again to the Sep, unless both accounts are at same provider.
Also any chance you have losses in the taxable brokerage?
John | * Friends and family and money | * What you recommend will have periods of underperformance. You will be blamed. | * You avoid the suspicion of "self-serving." by Taylor Larimore
Topic Author
redbarnyard
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by redbarnyard »

GMCZ71 wrote: Tue Mar 21, 2023 7:22 pm Taxable brokerage is perfect. You will probably need to transfer to your bank then transfer again to the Sep, unless both accounts are at same provider.
Also any chance you have losses in the taxable brokerage?
No losses, but I have one holding with rather minimal gains. I've just reached out to my accountant to get his take on all of this. Like is it worth the write-off to max my SEP even though it would raise my income and I'd be realizing gains? It's a little above my pay grade!
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redbarnyard
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by redbarnyard »

mhalley wrote: Tue Mar 21, 2023 3:29 pm This comes under the “money is fungible” doctrine.
https://learn.robinhood.com/articles/6e ... ngibility/#
Thanks for the link
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redbarnyard
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by redbarnyard »

Evergreen2022 wrote: Tue Mar 21, 2023 1:00 pm Sure, you just will owe taxes on the gains (if any) in the brokerage when you sell the shares
Yeah, thats one of the complicating factors. Weighing whether it's worth it or not.
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redbarnyard
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by redbarnyard »

sycamore wrote: Tue Mar 21, 2023 3:44 pm ^ right.

The relevant rule is that you need $X in compensation/earned income to contribute $X to the SEP IRA. That doesn't mean that $X must literally/virtually come out of your paycheck or bank account where your paycheck was deposited to. It's not like the IRS or your IRA custodian is tracking where the money "came from."
cool, thanks
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GMCZ71
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by GMCZ71 »

redbarnyard wrote: Wed Mar 22, 2023 7:04 am
GMCZ71 wrote: Tue Mar 21, 2023 7:22 pm Taxable brokerage is perfect. You will probably need to transfer to your bank then transfer again to the Sep, unless both accounts are at same provider.
Also any chance you have losses in the taxable brokerage?
No losses, but I have one holding with rather minimal gains. I've just reached out to my accountant to get his take on all of this. Like is it worth the write-off to max my SEP even though it would raise my income and I'd be realizing gains? It's a little above my pay grade!
Realizing gains depends on your tax status. Did you get the bonds out of your taxable, they are a tax drag?
John | * Friends and family and money | * What you recommend will have periods of underperformance. You will be blamed. | * You avoid the suspicion of "self-serving." by Taylor Larimore
dknightd
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by dknightd »

redbarnyard wrote: Wed Mar 22, 2023 7:06 am
Evergreen2022 wrote: Tue Mar 21, 2023 1:00 pm Sure, you just will owe taxes on the gains (if any) in the brokerage when you sell the shares
Yeah, thats one of the complicating factors. Weighing whether it's worth it or not.
My hunch would be it is still a good idea. You contribute your self employment income to SEP IRA and get the deduction as usual. You use taxable account to pay for building project (which I assume is not associated with your self employment) and pay capital gains tax on it. My guess is you come out ahead doing this. But I could be wrong. I'm not a tax expert!
As stated above, money is fungible. But not always. I'm pretty sure you have to have self employment income to put it into a sep ira.
It will be interesting to find out what your accountant thinks. Are they tax experts?
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
erp
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Re: SEP IRA Question: I've been told no question is stupid, so

Post by erp »

redbarnyard wrote: Tue Mar 21, 2023 12:49 pm the tax deadline is approaching. I am self employed and have in the past contributed to a SEP IRA. This year I have a big building project that I've been saving for and don't really have the funds to put into my SEP. Is it possible and/or am I allowed to sell some stocks in my brokerage account to fund the SEP for 2022? My gut instinct is that it isn't permitted but I thought I'd check.
You can do this, or you can just file for a fed tax return extension and have until October to make your contribution. Maybe you'll have more cash available by then.
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