SEP IRA

Question: As a 1099 employee, my accountant has mentioned to me I should open a SEP?

What is a SEP? How would a 1099 employee (I have become incorporated as well) benefit from a SEP, and how is a SEP different from the IRA I already have? Is there a tax benefit?

Answer: You get to put more into a SEP than an IRA. For 2007 regular IRA is limited to $4,000 Contribution ($5,000 if age 50 or older). SEP Contribution limit is lessor of 25% of your compensation up to $225,000 or $45,000. As to establishing one, hopefully your accountant could help with that directly or knows someone in financial services to recommend. As to tax benefit, the more you can contribute, the lower your AGI.

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