Can I withdraw money from my SEP IRA without withholding taxes - mixed pre-tax and post-tax contributions?
So a few years ago I opened a SEP IRA through my credit union. I didn't really understand what I was getting into, but my financial advisor suggested it because I was running a partnership and doing a bunch of independent contractor work. I also had a regular full-time job with a W2. Initially, I was funding the SEP IRA from my business account with untaxed income from the partnership. After I closed down the partnership, I just kept contributing to the same SEP IRA from my personal checking account with money that I'd already paid taxes on. Looking back, I probably should have done something different when the business ended, but I'm more of a technical person than a finance guy and just kept going with what was familiar. Now I'm wondering if I can take money out without having taxes withheld since some of the contributions were already taxed.
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Thais Soares
The short answer is no, you can't withdraw from a SEP IRA without tax withholding, but your situation is more complicated because of how you contributed. SEP IRAs are always pre-tax contributions, even when you contributed from your personal checking account. The money you put in from your personal account after dissolving your business would still be considered pre-tax contributions that you'd claim as deductions on your tax return. If you didn't claim those deductions, you've essentially lost a tax benefit and potentially created a messy situation. For any withdrawal from a SEP IRA, the default withholding is 10%, though you can elect to have more withheld or nothing withheld. But regardless of withholding, distributions will be reported to the IRS on Form 1099-R and you'll need to pay income tax on the withdrawals (plus a 10% early withdrawal penalty if you're under 59½).
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Fiona Gallagher
•Wait so when I was contributing from my personal checking account after closing the business, was I supposed to be claiming those as deductions on my taxes? Because I definitely wasn't doing that. I thought since I was putting in money I already paid taxes on, I wouldn't need to claim anything. Does this mean I've been doing my taxes wrong for years?
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Thais Soares
•Yes, you should have been claiming those personal checking contributions as deductions on your tax return. The way SEP IRAs work is that ALL contributions are pre-tax, regardless of the source of funds. When you contribute from personal checking, you're still entitled to take a deduction for those contributions on your tax return. If you didn't claim those deductions, unfortunately you may have essentially "double taxed" that money - once when you earned it, and you'll be taxed again when you withdraw it. You might want to consider filing amended returns for the years you made these contributions but didn't claim the deductions, though there's a time limit (generally 3 years from the filing date) for claiming refunds.
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Nalani Liu
After dealing with a similarly confusing SEP IRA situation, I tried using taxr.ai (https://taxr.ai) to analyze my contribution history and tax implications. Their system analyzed all my past contributions and figured out exactly which ones qualified for tax advantages and which ones didn't. They helped me determine how much of my SEP IRA was actually taxable upon withdrawal and even helped identify which past tax returns I could still amend to claim missed deductions. Really worth checking out for anyone with complicated retirement contribution situations.
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Axel Bourke
•How exactly does taxr.ai work for something like this? Would I need to upload my tax returns and statements from my SEP account? I'm a bit worried about putting all that financial info online.
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Aidan Percy
•Does it actually work with SEP IRA issues specifically? I've used other tax help services and they usually just give generic advice that I could find on Google myself.
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Nalani Liu
•The process is pretty straightforward - you upload your tax documents and SEP IRA statements, and their AI analyzes the patterns to identify discrepancies. They use bank-level encryption, so it's as secure as doing online banking. I was hesitant at first too, but it was the only way to untangle my contribution mess. Yes, they absolutely handle SEP IRA issues specifically. That's actually what impressed me - they identified exactly which contributions were properly deducted and which weren't, rather than just giving generic advice. They even found deductions I missed from 2021 that I was still eligible to claim through an amended return.
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Aidan Percy
Just wanted to follow up about taxr.ai since I decided to try it for my SEP IRA situation. Their system found that I had been making contributions from my personal account for three years without claiming the tax deductions! They walked me through filing amended returns for the two years I could still claim, and I'm getting nearly $4,200 back in tax refunds I would have completely missed. They also helped me understand which portion of my SEP would be taxable upon withdrawal based on my contribution history. Way better than the generalized advice I was getting elsewhere.
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Fernanda Marquez
If you need to sort this out with the IRS directly, good luck getting through to someone who understands SEP IRAs. I spent two weeks trying to reach the IRS about a similar issue. After 6 failed attempts and hours on hold, I used Claimyr (https://claimyr.com) and got connected to an IRS agent in 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent I spoke with was able to check my contribution records and confirm which tax years I could still amend. Made a confusing situation much clearer and saved me from potentially making bigger tax mistakes.
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Norman Fraser
•How does Claimyr actually work though? Does it actually get you through to the IRS faster or is it just another service that gives you the same info you could find online?
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Kendrick Webb
•Yeah right. Nothing gets you through to the IRS faster. I've been trying to resolve an issue for months. If this actually worked, the IRS would have shut it down already. They don't want people getting through easily.
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Fernanda Marquez
•It works by navigating the IRS phone tree and waiting on hold for you. When an agent finally picks up, you get a call connecting you directly to that agent. I was skeptical at first too, but it literally called me when an actual human at the IRS picked up, which saved me from having to wait on hold for hours. The difference is you're actually talking to an official IRS representative who can access your tax records and give you authoritative answers specific to your situation. This isn't generic advice - they can see your actual filing history and tell you exactly what you can and can't do based on your specific account.
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Kendrick Webb
I hate to admit when I'm wrong, but I need to follow up on my skeptical comment. After more frustration with the IRS, I decided to try Claimyr as a last resort. I was absolutely shocked when they called me back in about 45 minutes with an actual IRS agent on the line. The agent was able to pull up my SEP IRA contribution history and confirmed that I could still file amended returns for 2022 and 2023. They walked me through the exact forms I needed and how to document the previously unclaimed deductions. I've already submitted the amendments and am expecting about $3,200 back. For anyone dealing with complex IRS issues, especially retirement accounts, it's definitely worth it to speak directly with an agent.
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Hattie Carson
I had this exact same problem! My accountant told me that for any SEP IRA, you need to file Form 8606 for nondeductible contributions if you're contributing post-tax dollars. Did you ever file that form? If not, the IRS has no way of knowing which contributions were pre-tax vs post-tax, so they'll assume all withdrawals are fully taxable.
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Fiona Gallagher
•I've never even heard of Form 8606! My tax guy never mentioned anything about it. So does this mean all my money that I put in after I closed my business is going to be double-taxed when I withdraw it? Is there anything I can do at this point?
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Hattie Carson
•The problem is that SEP IRAs aren't designed for post-tax contributions in the first place. Form 8606 is actually for traditional IRAs and Roth conversions. Your contributions from your personal account should still have been deducted on your tax return as pre-tax contributions, even though you were using already-taxed money. At this point, you should talk to a tax professional about filing amended returns for any years still within the 3-year window. They can help you claim the deductions you missed. For the older contributions outside that window, unfortunately, you may have lost the tax benefit and effectively double-taxed that money.
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Destiny Bryant
Has anyone used the "substantially equal periodic payments" (SEPP) method to withdraw from a SEP IRA? I'm considering this to avoid the 10% penalty since I'm only 52.
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Dyllan Nantx
•I've been doing SEPP (72t distributions) from my SEP for about 2 years now. It works but be super careful - if you mess up even one payment amount or timing, the IRS can retroactively apply penalties to ALL your previous withdrawals. I recommend getting professional help setting it up. Also, you're locked into the payment schedule until you're 59½ or for 5 years, whichever is longer.
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Misterclamation Skyblue
This is a really complex situation that highlights why SEP IRAs can be tricky for people who transition from business to personal contributions. Based on what others have shared here, it sounds like you have a few different issues to untangle: 1. Tax withholding on withdrawals - as mentioned, SEP IRA distributions will have taxes withheld regardless of how you contributed 2. Missed deductions - if you contributed from personal funds after closing your business but didn't claim tax deductions, you may have double-taxed that money 3. Potential amended returns - you might be able to recover some of those missed deductions if you're still within the filing window Given how complicated this has gotten, I'd strongly recommend getting professional help to sort out your contribution history and determine exactly what your tax situation is before making any withdrawals. The stories others shared about using services like taxr.ai or getting through to actual IRS agents via Claimyr sound like they could be really helpful for someone in your position. Don't let this drag on - the longer you wait, the fewer options you'll have for recovering those missed deductions.
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Javier Torres
•This is really helpful advice! As someone new to SEP IRAs, I'm wondering if there's a way to prevent this kind of confusion from happening in the first place. Should people always work with a tax professional when setting up a SEP IRA, especially if they're transitioning between business and personal situations? It seems like there are so many rules and potential pitfalls that could cost thousands of dollars if you get them wrong.
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