IRA Rollover Giving from SEP or Simple IRA?

SEP IRAs and Simple IRAs are retirement accounts which small businesses create (typically for the owner of the business) – similar to 401k plans but much simpler.

This question has come to me twice in the past few weeks so it must be of interest.  Can an old enough donor make an IRA Charitable Rollover gift from his/her SEP or Simple IRA?  A client also just asked me this question where the donor said he had two SEPs (not sure why he needed two).  Here is the answer I gave:

The answer is yes, with an important caveat!

Bottom line – the SEP IRA (Simplified Employee Pension) or SIMPLE IRA could be eligible for the Charitable IRA Rollover IF the donor is 70.5 (always worth mentioning) AND the donor has not made any employer contributions to the SEP or SIMPLE IRA in this fiscal year (based on his business’ taxable year – which could be different than the calendar year). In other words, it can’t “active” to work for the IRA Charitable Roller.

To your question, your donor has two SEPs! Is one “active” and one “inactive”? I believe if one of the accounts is inactive (i.e. is not receiving any employer contributions this fiscal year), that the inactive account would be eligible to make a Charitable IRA Rollover gift from!!

Below is a blurb from the IRA website:

Q-36. Is the exclusion for qualified charitable distributions available for distributions from any type of IRA?

A-36. Generally, the exclusion for qualified charitable distributions is available for distributions from any type of IRA (including a Roth IRA described in § 408A and a deemed IRA described in § 408(q)) that is neither an ongoing SEP IRA described in § 408(k) nor an ongoing SIMPLE IRA described in § 408(p). For this purpose, a SEP IRA or a SIMPLE IRA is treated as ongoing if it is maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner’s taxable year in which the charitable contributions would be made.

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