Dakshina Bharata Natee Nata Samakhya

The SEP IRA contribution limit is generous, and just one of the rewards of this plan that has been specifically structured to favor the self-employed person and small companies . For those lacking the resources to go with a more standard retirement plan, the SEP is extremely attractive because of the low management costs and simplicity of establishing the account . For small businesses , qualifying employees isuncomplicated and straightforward. The employee must be at least 21 years old, have worked for the employer for three of the past five years, and received at least $550 in compensation. If you are an employee participating in your employer’s plan, your SEP IRA contribution can be 25% of your salary. The employer will make the decision of the amount and is not locked in to either amount or frequency for the SEP IRA contribution. The employer can make a decision annually , or even choose no contribution at all. Many employers will base this percentage decision on the net profit of the business or as a reflection of current financial conditions and their effect on the business. If you are self-employed, you don’t have wages. Rather you have net profits from your business undertaking. Self-employed people can make a SEP IRA contribution of 20% of net profits up to $44,000 annually . Net profits for a SEP plan are calculated by taking the net self-employment income and subtracting one-half of the self-employment taxes. The resulting net-net self-employment income is then multiplied by 20% to arrive at the SEP IRA contribution amount. You have until your final tax filing deadline, including extensions, to contribute to your SEP for last year, but you do have to fund your SEP before you file your tax return. The higher limits on a SEP IRA contribution, for both the self-employed and the small business , absolutely is an advantage to those who need to quickly prepare for their retirement security.