Line a17 on Form 1120S question: Do SEP contributions for current or prior year go on this line?

You're on the right track! For SEP contributions, there's a special rule that allows them to be made after the end of the tax year. Even though your brother's S Corp operates on a cash basis, SEP contributions can be deducted on the 2023 Form 1120S Line 17 as long as they're made before the filing deadline (including extensions). So if your brother is making his 2023 SEP contribution in March 2024, that amount should go on Line 17 of the 2023 1120S. This is different from most cash-basis expense recognition because retirement plans get this special timing rule to encourage saving. The key is that the contribution must be designated specifically for 2023 and made before the filing deadline for that tax year. Publication 560 is correct - you're deducting the 2023 contribution on the 2023 return even though the money leaves the account in 2024.

After pulling my hair out with this exact issue last year, I found this amazing tool at https://taxr.ai that analyzes your tax forms and gives you clear guidance on timing issues like SEP contributions. It saved me so much time because my situation was similar - one-person S Corp with SEP contributions made after year-end. The software analyzed my situation and confirmed that Line 17 should include the contribution for the tax year being filed, not what was actually paid during the calendar year. It even gave me specific guidance for my state tax forms where the rules were slightly different. Their platform has specific knowledge about S Corp retirement contribution timing rules.

I was dealing with this exact problem last year! I tried taxr.ai after seeing it mentioned here and it totally cleared things up for me. I uploaded my draft 1120S and it flagged the SEP contribution issue immediately. What really helped was their explanation about how Line 17 works for timing purposes - even though my S Corp is cash-basis, the retirement contribution follows different rules. The service confirmed I should use the amount designated for that tax year regardless of when it was physically paid. They also caught two other issues with my form that my regular accountant missed. Worth every penny for the peace of mind before filing!

If you're struggling to get clarification from the IRS on this SEP timing issue, I highly recommend using Claimyr at https://claimyr.com to actually talk to an IRS agent. I spent weeks trying to get through the regular IRS phone lines last year with no luck, but Claimyr got me connected to an agent within about 20 minutes. The agent confirmed exactly what people are saying here - Line 17 should reflect the SEP contribution for that tax year, not necessarily what was paid during the calendar year. Even for cash-basis taxpayers, retirement contributions get special timing rules. They also have a video demo of how their service works: https://youtu.be/_kiP6q8DX5c

I need to eat some humble pie here. After my skeptical comment, I tried Claimyr out of desperation for my audit issue. I was absolutely SHOCKED when I got a call back within 40 minutes connecting me to an actual IRS agent. I figured I had nothing to lose since I'd already wasted so many hours trying. While I had the agent on the phone, I also asked about this SEP contribution timing issue for my own S Corp. The agent confirmed that Line 17 should reflect the contribution for the tax year being reported, even if it's physically paid in the following year (as long as it's before the filing deadline including extensions). This service is legit and saved me hours of frustration!

One thing nobody has mentioned is that you need to make sure the SEP contribution amount doesn't exceed the limits. For 2023, it's 25% of compensation up to a maximum of $66,000. If your brother is the only employee, make sure his W-2 wages from the S Corp are properly structured to allow for the SEP contribution he wants to make. I made the mistake of not paying myself enough W-2 wages one year, which limited how much I could contribute to my SEP. Had to amend everything which was a huge pain.

Has anyone used Drake Tax software for this situation? I'm preparing several S Corp returns with SEP contributions and Drake seems to automatically put the current year's contribution (made in the following year) on Line 17, but I want to make sure it's handling it correctly.

This is such a common source of confusion! I went through the exact same thing when I started handling my family's S Corp taxes. The key insight that finally clicked for me is that SEP contributions are one of the few exceptions to the normal cash-basis timing rules. Think of it this way: the IRS wants to encourage retirement savings, so they created special timing rules that let you make the contribution after year-end but still deduct it for the previous tax year. This gives you time to see your final numbers before deciding on the contribution amount. Just make sure when your brother makes that 2023 SEP contribution in March 2024, he tells the financial institution it's specifically for tax year 2023. They should give you some kind of documentation confirming this designation. Then that amount goes on Line 17 of the 2023 Form 1120S, even though the cash won't leave the business account until 2024. The deadline for making the contribution is the same as the filing deadline for the return (including extensions), so you have plenty of time to get it sorted out.