SEP IRA for a previous year
NimbusUnlimited
Member Posts: 10
I am a single-member LLC that just finished my first full year of business. My CPA had me open a SEP IRA and contribute for my previous year's taxes (2020), which we are able to do through April of the current year (2021).
The check has cleared and in Wave, shows as a 2021 expense.
How should I categorize this expense?
How can I attribute the expense a 2020 expense in the system so it does not impact my 2021 P&L report?
Please advise. Thank you!
0
Comments
@NimbusUnlimited,
You can go two ways with this. First, a SEP is considered an employer contribution (unlike an IRA). However, the business does not take a deduction for the SEP as a single member LLC. It is presented on Schedule 1 of Form 1040 not Schedule C -Profit or Loss from a Business
First way
Create a short term liability Pension Payable and an expense Pension Expense.
Next do a journal entry dated 12/31/2020 to debit Pension Expense and credit Pension Payable for the SEP contribution. Now you can classify the withdrawal against the liability, the expense will be on your 2020 profit and loss.
Or
You can classify as an owner draw.