I’d like an example to help me in understanding SEP- and SIMPLE IRA contributions. Can you illustrate with a case study?
Yes. The following case study illustrates the treatment of contributions to a SEP IRA. The same example would work for a SIMPLE IRA as well. In December 2006, Sue, the sole proprietor of a catering business, made a contribution of $4,000 to her SEP-IRA. Later, when her year-end Schwab statement arrived, the contribution was reflected for 2006 in the Contribution Summary section. Nearly four months later, just prior to her April 17, 2007, tax-filing deadline, Sue made a final contribution for 2006 of $5,000—making her total SEP-IRA contributions for 2006 $9,000.
