You can contribute to or even set up a Simplified Employee Pension Individual Retirement Account (SEP IRA) as late as the due date of your federal tax return (including extensions) for the relevant tax year. For most people, this means that you have until April 15 (or October 15 with an extension) of the next year to finish up your prior year SEP IRA funding.

Even with SEP IRA contributions permitted though, funding your SEP IRA in the new year can be confusing. We recently had the following question:

I’m doing a prior year SEP IRA contribution. However, Schwab will only let me code the contribution as a current year SEP IRA contribution. What am I doing wrong?

The short answer is that you are doing nothing wrong.

Interestingly, custodians are not required to report to the IRS for which tax year SEP IRA contributions are made. Instead, they are only required to report in which calendar year SEP contributions occur.

You can see this in the instructions for Form 5498, the form which reports IRA contributions to the IRS.

Box 8 of Form 5498 is where “SEP contributions” is reported. Box 8 has the following IRS instructions (emphasis added):

Box 8. SEP Contributions
Enter employer contributions made to a SEP IRA (including salary deferrals under a SARSEP) during 2024, including contributions made in 2024 for 2023, but not including contributions made in 2025 for 2024. Trustees and issuers are not responsible for reporting the year for which SEP contributions are made. …Include in box 8 SEP contributions made by a self-employed person to their own account. Also, include in box 8 contributions to a Roth SEP IRA.

This is why Charles Schwab does not let you code a contribution as a prior year contribution.

In summary, when you are doing your SEP IRA account funding, it will always be coded as the current tax year. Then, you and your tax preparer are responsible for coding it as the correct tax year on your relevant tax return.

Photo by Deva Williamson on Unsplash. Image has been cropped.