An SEP is a retirement plan based on an individual retirement account (IRA) into which business owners can make pre-tax contributions for both themselves and their eligible employees. It is ideally suited for self-employed workers, freelancers, and small-business owners because it's easy to establish and administer.
Why SEP IRAs Work for Some Small Businesses. SEP IRA can be a good option for sole proprietors or small companies seeking a plan that is flexible and simple to administer, with high limits on contributions.
If you have your own company, whether you are an LLC or even a sole proprietor (in which you report your income on Schedule C of your personal 1040 tax return), you can open and fund a SEP IRA.
A SEP IRA is a basic individual retirement account, much like a traditional IRA. SEP IRAs are for business owners, and contributions are tax-deductible. Investments grow tax-deferred until retirement, when distributions are taxed as income.
A SEP IRA is a type of traditional IRA for self-employed individuals or small business owners. (SEP stands for Simplified Employee Pension.) Any business owner with one or more employees, or anyone with freelance income, can open a SEP IRA. ... Like a traditional IRA, the money in a SEP IRA is not taxable until withdrawal.
SEP IRA. Best for: Self-employed people or small-business owners with no or few employees. Contribution limit: The lesser of $57,000 in 2020 ($56,000 in 2019) or up to 25% of compensation or net self-employment earnings, with a $285,000 limit on compensation that can be used to factor the contribution.
Unlike a traditional 401(k) plan, SEP IRAs have little to no administrative overhead. Companies with only a single employee can take advantage of SEP IRAs, meaning they can be a good choice for solo entrepreneurs or gig workers. Most importantly, SEP IRAs offer more generous tax breaks than personal IRAs.
If an extension was filed a sole proprietor can establish and fund a SEP IRA by October 15. SEP IRAs must be established and funded by your tax filing deadline plus applicable extensions. Deposit checks by mail or through mobile deposit, contribute online through Bill Pay or via EFT, or call us.
1. You open your SEP IRA with your SSN. A single member LLC is considered a disregarded entity and your income/expenses will be entered on a schedule C on your tax return. SEP contributions are entered in a section called Other Business Situations, Self-Employed Retirement Plans.
Most of you will be able to make larger tax-deductible contributions and, if you are over 50, you will be able to save an additional $6,000 per year as a catch-up benefit. There is still time to Open a SEP IRA for 2017, and lower your taxes.
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