I don't have direct experience with this issue but my best
guess is that I believe that your CPA is correct, you cannot
contribute to your own SEP-IRA from your earnings because
you are a partner and are no longer a self-employed
contracter.

However, from the definition of an employer (see below),
since you are a partner then your partnership, instead of
you, would make the contribution to your SEP-IRA (assuming
the partnership has properly set up a SEP).

As for the the female partner, I don't think she had to set
up a PA in order to make contributions. It is probably set
up so that she is an employee of the PA, the partnership
pays the PA for her services and then the PA, as her
employer, makes the contribution to her SEP-IRA. It also may
have been set up to provide some limited liability for her.

As for the senior partner, since he was the original sole
owner, then he was considered self-employed and could
therefore make contributions. Now that he is in a
partnership, the partnership should probably be making the
contributions to his SEP.

The partnership probably needs to correct how the SEP plan
is set up.

Rudy
www.LizcanoTaxServicesLLC.com

From Publication (Pub) 560
Employer. An employer is generally any person for whom an
individual performs or did perform any service, of whatever
nature, as an employee. A sole proprietor is treated as his
or her own employer for retirement plan purposes. However, a
partner is not an employer for retirement plan purposes. The
partnership is treated as the employer of each partner.

Here is a link to resources to SEP info:
http://www.irs.gov/retirement/articl...111398,00.html

Link to Pub 560 index
http://www.irs.gov/publications/p560/ix01.html

The following is from Pub 560 at this link:
http://www.irs.gov/publications/p560/ch02.html#d0e1199

A simplified employee pension (SEP) is a written plan that
allows you to make contributions toward your own retirement
(if you are self-employed) and your employees' retirement
without getting involved in a more complex qualified plan.

Under a SEP, you make the contributions to a traditional
individual retirement arrangement (called a SEP-IRA) set up
by or for each eligible employee. A SEP-IRA is owned and
controlled by the employee, and you make contributions to
the financial institution where the SEP-IRA is maintained.

SEP-IRAs are set up for, at a minimum, each eligible
employee (defined later). A SEP-IRA may have to be set up
for a leased employee (defined in chapter 1), but does not
need to be set up for excludable employees (defined later).

Eligible employee. An eligible employee is an individual
who meets all the following requirements:

* Has reached age 21.
* Has worked for you in at least 3 of the last 5 years.
* Has received at least $450 in compensation from you for
2005.

Tip: You can use less restrictive participation requirements
than those listed, but not more restrictive ones.

How Much Can I Contribute?

The SEP rules permit you to contribute a limited amount of
money each year to each employee's SEP-IRA. If you are
self-employed, you can contribute to your own SEP-IRA.

Deduction Limit for Self-Employed Individuals

If you contribute to your own SEP-IRA, you must make a
special computation to figure your maximum deduction for
these contributions. When figuring the deduction for
contributions made to your own SEP-IRA, compensation is your
net earnings from self-employment (defined in chapter 1),
which takes into account both the following deductions.

* The deduction for one-half of your self-employment tax.
* The deduction for contributions to your own SEP-IRA.

The deduction for contributions to your own SEP-IRA and your
net earnings depend on each other. For this reason, you
determine the deduction for contributions to your own
SEP-IRA indirectly by reducing the contribution rate called
for in your plan. To do this, use the Rate Table for
Self-Employed or the Rate Worksheet for Self-Employed,
whichever is appropriate for your plan's contribution rate,
in chapter 5. Then figure your maximum deduction by using
the Deduction Worksheet for Self-Employed in chapter 5.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I have a question regarding eligibility for contributing to
a SEP IRA.

I am a physician and am currently at 75% partnership level
in a private practice group (LC).

During 2004; I was a contractor for the first half of the
year and then a partner (50% level) for the rest of the
year. So, in terms of tax documents, I received a 1099 as
well as a K-1. And I contributed towards my SEP IRA (I think
I made the maximum allowable contribution). Now for 2005, I
was a partner during the whole year (50% level for the first
half and 75% level for the second half). So, I only received
a K-1

Now my CPA tells me that I am NOT qualified to make a
contribution to the SEP IRA (because I am no longer "self
employed") and therefore cannot use the maximum allowable
limit of $44,000 a year.

One of my partners agrees with that (she is part time; at
50% level) and tells me that she had to set up a P.A.
(professional association) for herself - basically
incorporate herself so as to be able to make the maximum
contribution towards her SEP IRA every year.

However, my senior partner (who has been at 100% partnership
level for the last many years) tells me that he has been
contributing towards his SEP every year - without having to
set up any kind of a P.A or anyhting else like that.

I am very confused and am not sure whom to believe. Please
advise.

Thanks

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >