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Contributions SEP IRA – Things To Know

By Guest Author On May 11, 2011 Under Success Secrets

Self-employed persons prefer the SEP IRA because the accountoffersnumerous benefits, including theoption for greater contributions. Contributions SEP IRA are calculated differently for the self-employed, because theygenerally do not receive wages. The self-employed have net profits from their business enterprise. A self-employed person can contribute 20% of net profits up to $44,000 yearly. To determine the contribution amount allowed take the net self-employment income and subtract one half of the self-employment taxes. The resulting net/net self-employment income is then multiplied by 20% to determine the maximum contribution amount allowed. With these more generous contributions SEP IRA there is an opportunity to save more funds for retirement at a quicker pace. This benefit is especially attractive for individuals who may have gotten a late start saving in preparation for their retirement years. Contributions SEP IRA for the previous year can be funded up until the final deadline, including extensions, for tax filing. However the contribution must be made prior to that filing. A SEP account issimple to establish and known for the simplicity and low-cost of administration . The SEP IRA works like a traditional IRA when it comes to distributions. Those withdrawals are taxable at the rate in effect at the time of disbursement , and there is a penalty if any withdrawal is made before the age of 59 ½ years old. The SEP can be rolled over into another form of IRA since themoney it contains istotally vested as soon as it is contributed. A SEP plan is an appropriate choice for S and C corporations, sole proprietorships, partnerships, and LLCs. Small companies that may not have the resources to provide a conventional retirement plan for their employeesfrequently decide on a SEP plan, and can contribute up to 25% or $49,000 every year on behalf of the qualified employee. The contributions SEP IRA are just one reason to learn more about the SEP IRA.

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