Sep Ira
Just exactly what is a SEP IRA? A SEP IRA is a retirement account or plan that is specially designed for small business owners and the self-employed. SEP IRA eligibility is determined by your employment. If you are a sole proprietor, are in a partnership, an S or C corporation or an LLC you qualify.
SEP IRA contribution limits are relatively high and this makes them extremely popular. Being virtually 100% tax deductable and the earnings on a SEP IRA being tax deferred are two more huge reasons they are a good choice for the self-employed.
SEP IRA rules for contributions vary in a couple ways. If the business is an incorporated S or C, partnership or LLC choosing to be taxed as a corporation and the business owner is paid a W-2 salary then the contribution limit is between 0 and 25% of the owner's W-2 salary. If the SEP IRA account is opened for unincorporated businesses the rule for contributions is 0 to 20% of the net adjusted self-employment income.
Most instances a SEP IRA is initiated by business owners with no employees. There are some circumstances where a business owner with employees might want to open a SEP IRA. In this instance the business owner is the sole contributor to the employee's SEP IRA accounts but these contributions are also 100% tax deductable.
SEP IRA's generally must be opened and funded by tax filing deadline which is usually April 15th of each year. If a business owner files an extension then they will also have until the extension expires to fund the SEP.
With a top limit of $49,000 in 2009, the SEP IRA can be a phenomenal plan for retirement for the self-employed. Another consideration is that a 401K account can be contributed to along with the SEP IRA.
