SEP IRA

Posts Tagged ‘sep’

Question: Taxes SEP IRA-Withdrew 12,000 dollars?

I withdrew 12,000 dollars from my SEP IRA. Im 20 years old, and I live in FL. How much in taxes am I looking at paying. It fidelity and everytime i withdrew the money from the SEP IRA, i had the option to pay 10 percent from how much i withdrew, and i did.

Answer: There is a 10% early withdrawl penalty on distributions from an IRA, and other qualified retirement plans, prior to reaching age 59 1/2. You also pay taxes on the distribution, and the amount depends on your income and deductions. Contributions to retirment plans receive favorable tax treatment because they are for your retirment. If you take them out early, they are not for your retirment thus the favorable tax treatment is taken away=10% penalty.

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Question: SEP/401k options for a (unincorporated) 1099 contractor ?

I am a 1099 contractor and interested in setting up a 401k/SEP account. From my research so far it seems like i can set up a SEP plan and contribute up to 25% of pretax income. I also looked into Solo 401k but it seems like it is only available to incorporated businesses? I would like to contribute more than 25% of my income but as a 1099 contractor do i have any other options?

And also if i contribute 5k to Roth IRA in the same year, does that mean i can contribute 5k less to SEP or are they both independent of each other and it doesn’t matter either way?

Answer: You may have additional options with a Keogh plan if you cannot qualify for a 401k plan since you are not an incorporated business. Qualified plans are very complex vehicles, and it is best that you consult with an enrolled agent to determine the best plan for your situation. An enrolled agent is a CPA who takes additional training and has received additional certifications in tax law.

You can, however contribute to both a SEP IRA and a Roth IRA without it affecting your Contribution limits. You must be under the maximum income limit to qualify for a Roth IRA, which is $101,000 if you’re single or $159,000 if you’re married filing jointly. Over that amount, your Contribution gets phased out.

If you’re under 50 years old, you can contribute up to $5,000 to a Roth IRA ($6,000 if you’re 50 or older) and contribute the maximum to a SEP-IRA. That is exactly what I do, and I’m also self-employed as a 1099 contractor.

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Question: Will employer contributions to a SEP IRA be counted in the same category as traditional IRA contributions?

Is it possible to make contributions to a traditional or Roth IRA while your employer makes yearly contributions to a SEP IRA? I also recently married and my husband already has a traditional IRA just under his name. Would his contributions to that account factor into this equation?

Answer: You can still make contributions to your own individual traditional or Roth IRA. The SEP IRA is a totally separate work-related account. However you cannot make tax-deductible contributions to a traditional IRA, since you have a SEP. Also, you and your husband can make contributions to your own accounts, IRAs are individual accounts, not household.

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