| SEP IRA stands for Simplified Employee Pension IRA. These plans
are also referred to as (SEP, SEP plans, SEP retirement plans,
SEP IRA simplified employee pensions, Simplified Employee Pensions,
Self-Employed Pension plans, Simplified Employee Pension Plans,
Simplified Employee Plans, Self-Employed Plans). |
| |
| You still have time to reduce your 2004 taxes by opening a SEP-IRA
before your 2004 tax-filing deadline. |
| Your company can
contribute up to 25% of your pay (20% if you’re self-employed) to
your SEP account up to a maximum of $41,000, for tax-year 2004. The
contribution is a deduction for your business yet it is excluded
from your taxable income. See table for maximum contribution to SEP IRA |
| |
You need to have a business in order to open a SEP. The advantage
of a SEP over a traditional IRA is that you can contribute much more
to a SEP than to an IRA.
You
can not borrow against your SEP-IRA account. If you are
self-employed and have no employees, consider opening a
Self-Employed Solo 401(k) at the same time that you open your SEP.
You can then request a tax-free rollover of your SEP account into
your Self-Employed Solo 401(k) account. That way you can
consolidate your accounts and take advantage of the greater features
of the Solo 401(k) such as its loan feature and its relatively
larger contributions as a percentage of pay. |
| Summary features of the Solo 401(K) with the loan option. |
| |
| By using the same
family of funds (Pioneer Investments) for both the SEP-IRA and the
Solo 401(k), moving funds from one plan to another is not a problem
and saves you transaction costs. |
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| Main Features of a SEP-IRA |
- Employees do not get to contribute; only the employer contributes to
the SEP accounts.
- Employer
must contribute the same percentage of compensation for every
eligible employee. Eligible employee is defined as anyone at
least 21 years old who has worked for you for any three of the past five years
– and who earned $450 or more in the current year).
- Employees can make withdrawals from their SEP account at anytime.
Withdrawals are taxed in the same manner as traditional IRA
withdrawals.
- Employer
chooses whether and how much to contribute each year.
|
| What are the
SEP-IRA administration fees? |
| The annual custodial fee is generally less than $20 per employee and
is automatically deducted from each employee's SEP-IRA. No set-up
fees. |
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| How to Set Up SEP IRA Plan |
| Fill out the Request Application form online to receive your free forms and documents by Email. |
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