SEP IRA

Archive for February, 2008

Question: What is the combined Contribution limit when having both a SEP and SIMPLE IRA?

Suppose I work for an employer offering a SIMPLE IRA and on the side I have a sole prop business. Can I use the self employment income and set up a SEP. If so, how do I figure the Contribution limits?

Answer: Hi!

Yes, you can set up a SEP for your sole proprietorship. I have included a link below to IRS Pub 560. The info regarding SEP contributions begins on page 6. If you need more help I can be reached through my profile.

Hope this h

Question: is it mandatory to fill out the other parts of the TurboTax application ie. tax/credits, deductions,?

questions about ira accounts and other questions not related to federal or state taxes etc. to people it doesn’t apply to have to be filled out?
Because those are a lot of extra questions for someone whose taxes are simple.

Answer: No. Only answer the questions that are related to your tax situation.
If you do not have an ira account- just skip the questions and other questions that are not related just skip them.
It is easy.

Simple Minds: Belfast Child (up-scaled HD)

What is a SIMPLE IRA?

SIMPLE IRA stands for Savings Incentive Match Plans for Employees (SIMPLE). A SIMPLE IRA is sometimes called a SIMPLE Plan, SIMPLE program, or SIMPLE retirement plan or even salary reduction agreement. 

Definition of SIMPLE IRA

The IRS defines a SIMPLE IRA plan as a tax favored retirement plan that certain small employers including self employed individuals can SEP up for the benefit of their employees. 

A SIMPLE retirement plan is a written agreement or a salary deduction agreement between an employee and an employer that allows eligible employee or self employed business owner to choose to: 

• reduce his or her salary or compensation each pay period by a certain percentage, and

What is the definition of eligible employees for SIMPLE IRA purposes?

Only eligible employees can contribute and participate in the SIMPLE IRA plan set up by the small business employer. Employees that are eligible to participate in the SIMPLE IRA plan must be allowed to participate. In general, employees are eligible if they: 

• received at least $5,000 in compensation from the employer in the past 2 years prior to the current tax year

What is a Simple Ira For Self Employed people?

Usually self employed people open SEP IRAs instead of SIMPLE IRAs. However, if a self employed individual wants to open a SIMPLE IRA, he or she can if he or she received earned income. For the purpose of Simple Ira Eligibility, a self employed person is considered an employee. 

What is compensation for SIMPLE IRA?

To qualify to participate in a Simple Ira Plan, the employee must have certain level of compensation where compensation includes: 

• wages, tips and other pay from the employer that are subject to income tax withholding