Client, a husband and wife, is on extension for 2021. The husband has a Schedule C that employs his wife, and she got a W-2 for 2021. Both contributed to the maximum amount to their traditional IRAs during 2021 for 2021.
Husband would like to set up a SEP for 2021 and contribute to it for he and his wife by October 17, 2022. If they do so, the issue is whether they would be deemed part of a employer retirement plan for 2021. If so, that would serve to disallow an IRA deduction for the amounts they contributed already to 2021.
If memory serves me, there was a discussion about the timing and you are not considered to be part of a plan for 2021 if no contribution is made during calendar even though the plan year (2021) has a contribution credited to you. In other words, they could have a deductible IRA and a SEP deduction for 2021.
Is my understanding correct?