Categorizing SEP IRA for Self Employed, Sole Proprietor
JoshS
Member Posts: 3
As the title suggests, I am a sole proprietor with a SEP IRA, but I'm not sure how to categorize my contributions to it. My thinking is to put it as an Operating Expense titled SEP IRA. Does this sound right?
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Comments
@JoshS,
Two options
Create a Pension Expense (or SEP IRA) under Operating Expenses and categorize there or
Owner draw
A SEP is not deducted on Schedule C. If you are having Wave agree to Schedule C profit then you would do owner draw, if not, create pension expense.
Thank you Mike. To clarify, if the SEP isn't deductible (or is just not deductible on the schedule C), wouldn't that mean I shouldn't put it as an operating expense?
What would you do? I guess I'm looking for the most correct way to do this.
@JoshS,
There is no right or wrong on the Wave side. I have tax clients that will classify SEP either way, along with interest income, estimated tax payments etc. If you prefer that your schedule C agrees to Wave then I would classify as a draw, if the business account funds the SEP. So long as you can reconcile any differences between the profit and loss per Wave and that on Schedule C, it does not really matter.