Today, I'm gonna talk about the SEP IRA for the self-employed small business owner. There's a huge tax-reducing benefit that's different from other retirement plans. However, there's also a huge mistake that often gets miscalculated when figuring out the contributions into the SEP IRA. If this is your first time at her channel or you haven't subscribed, click on the subscribe button at the bottom. My name is Travis Sickles, a certified financial planner with 600 Financial Advisors. The SEP IRA is a lot like a 401K or a traditional IRA. The money you put into the SEP IRA goes in pre-tax, grows tax-deferred, and comes out as ordinary income. Just like the 401K or the traditional IRA, it could help you reduce your overall tax liability in the year that you contribute, which is this year. So, if you put it in now, it could count for 2018, or you can put it in and have it contribute for 2019, depending on how you want to reduce your taxes. The maximum contribution that you can put into the SEP IRA is $55,000 for 2018, and for the year 2019, it's going to go up to $56,000. Since we're already in 2019, if you're putting in those contributions for 2018, you can still put them in there up to $55,000. Alternatively, you can contribute for 2019, which would be $56,000. However, those contribution limits get capped at 25% of the total compensation or the total income. The most that you can contribute is $55,000 or $56,000, but it's also only up to 25%, whereas with the traditional IRA or the 401K, you can contribute up to 100% of your compensation. So, the percentage contribution is different than the traditional 401K. Here's a huge benefit of the SEP IRA that separates...
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Sep Ira 5305a Form: What You Should Know
If your employer makes a SEP contribution, you may, with your employer's written approval, make contributions up to your normal limit (5,000 maximum contribution for the 6-month period after your retirement). If your individual, including your spouse, is covered under a group health plan, the SEP contribution limit for the year is 50% of the premium paid but only up to the plan's actuarial limit. If your health plan does not provide maximum contribution limits for group health coverage, the group health coverage limit for the year is 25% of your plan premium for the period when you did not have coverage. If the plan's actuarial limit is more than the year after you retire, the premium contribution limit is reduced. Form 5305-A Traditional Individual Retirement Custodial (SEP) Contributions— If your employer's tax-exempt organization (TO) or another organization exempt from tax is authorized to make your SEP contributions, see Form 5305-A Simplified Employee Pension. Payroll Deductions: You may deduct contributions made to a SIMPLE IRA if you meet all the following: your employment with the participating employer was for at least 6 months immediately before the year you turned age 65 you made your SEP contribution in cash with money you earned; and you are required, by law or an IRS regulation, to deduct your contributions. Form 5305-SEP Simplified SEP IRA--Individual Retirement Contribution Agreement—Your employer may make contributions to your SIMPLE IRA up to 200,000 without a penalty. (Note: If an employer makes a SEP contribution, you may make unlimited contributions up to 5,000, but only if you meet all the following: you are covered by a group health plan (which includes a group health FSA); you made your SEP contribution in cash with money you earned; you are required, by law or an IRS regulation, to deduct your contributions; and you have made no SEP/SIMPLE IRA contributions for the 6-month period before the year you turn age 65.) A Form 5305A-SEP Simplified SEP IRA has been issued for you, as a single employee, which you signed in the presence of the representative designated for that purpose.
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