not enough liquid funds to contribute to sep ira and pay taxes

[secret.asian.man]

I am in a bit of a sticky situation.

I owe the IRS 46k in 2 weeks, and I want to contribute 23k to a sep ira, so I need about 70k.

I have about 60k in my bank account and in cash.

I have 13k in neteller.

I have 80k on a site which takes about 4 weeks to withdraw from.

I have 40k in fidelity, invested in index funds.


So I am considering these options:

-borrowing the money from my parents (probably doable but I'd like to avoid it)

-selling some of my index fund on fidelity (I don't know if this will happen quickly enough?)

-file as a pro, but contribute less to the sep ira

-filing as an amateur, paying 45k in tax, and nothing to the sep ira


Which seems like the best course of actioN?

btw i need maybe 4k for living expenses

[cbloom]

[ QUOTE ]

-file as a pro, but contribute less to the sep ira


[/ QUOTE ]

This is an easy option and not a disaster.

Alternatively just sell some stock. It only takes a few days to get that money to a bank account with electronic transfers.

[TLC]

How about filing an extension along w/ the 46K by 4/17? Then you have until 10/15 to file and fund the SEP IRA.

Per IRS Retirement Plans FAQs regarding SEPs:

What is the timeframe for depositing contributions into SEP-IRAs?
Contributions for a year must be deposited by the due date (including extensions) for filing your Federal income tax return for the year.

[LockLow34]

What about taking out a short term bank loan using your assets as collateral, then selling stock and using cash to pay back the loan when the money comes available? It's a better option than filing for an extension and incurring the interest and penalties that come along with that.

[nineinchal]

You would borrow from your parents.

You should also have the intention of NEVER paying them back.

If you are really great, you would avoid paying the IRS unless you make them expend a vast amount of resources to get the taxes you owe.

[ski]

unless you have a lot of expenses/gambling losses definately file as an amatur if u can get away with it,

[TLC]

[ QUOTE ]
It's a better option than filing for an extension and incurring the interest and penalties that come along with that.

[/ QUOTE ]There is no interest or penalty for filing an extension. It is an extension to file...not to pay. I suggested that he pay the 46K when he files for the extension.

Back to the OP...
If it were me, I would do everything possible to maximize contributions to tax-deferred (and tax-free) accounts for retirement. So, if you decide not to file for an extension and fully fund the SEP IRA later this year, I recommend that you tap into those those mutual funds either directly or indirectly.

It sounds like you just have a very short-term cash flow need since you appear to have adequate earning power. If that is the case, the funds are in a margin account, and you have significant unrealized gains in the funds, you may want to consider withdrawing the needed funds and paying Fidelity's margin rate if you can replenish it quickly. You'll need to crunch the numbers to see what makes sense for you.

Since the clock is ticking and you may have funds flying around trying to clear banks and such, I want to remind you of a few date issues:
1) the US equity markets are closed on 4/6 for Good Friday. I'm not sure if this impacts settlement dates (I suspect it does like other holidays);
2) the IRS deadline for filing your 1040 (or application for extension) is 4/17 this year.

[secret.asian.man]

[ QUOTE ]
unless you have a lot of expenses/gambling losses definately file as an amatur if u can get away with it,

[/ QUOTE ]

I thought so too, but my cpa showed me the numbers. Filing as a pro + contributing the max to a sep ira is almost exactly the same as filing as an amateur. And I have very little in the way of deductions.

[secret.asian.man]

TLC, thanks for the good info. I have decided to file an extension, and contribute the max in october to the sep ira. Since I have enough in the bank to cover the taxes, my situation is pretty much solved.