• October 20, 2021
Tax

Are you a high-profits online bookkeeping services in sacramento owner who doesn’t presently have a tax-advantaged retirement plan set up for yourself? A Simplified Employee Pension (SEP) can be just what you want, and now may be a awesome time to establish one. The SEP tax benefits have high contribution limits and are easy to set up. Best of all, there’s nevertheless time to establish a SEP for 2021 and make a contribution to it that you can deduct on your 2021 income tax go back.

2018 Deadlines for 2017

A SEP can be set up as past due as the due date (together with extensions) of your profits tax go back for the tax year for which the SEP is to first follow. That method you can set up a SEP for 2017 in 2018 so long as you do it earlier than your 2017 return submitting closing date. You have online bookkeeping services in tampa until the same deadline to make 2017 contributions and still declare a probably hefty deduction to your 2017 gone back.

Generally, other forms of retirement plans would shall had been hooked up by using December 31, 2021, in order for 2021 contributions to be made (even though lots of these plans do allow 2017 contributions to be made in 2018).

High Contribution Limits

Contributions for SEP tax advantages are discretionary. You can decide how a good deal to make contributions every 12 months. But be conscious that, in case your online accounting services in sacramento has personnel other than yourself: 1) Contributions must be made for all eligible personnel the usage of the identical percentage of compensation as for yourself, and a pair of) worker bills are right away a hundred% vested. The contributions pass into SEP-IRAs set up for each eligible worker.

For 2021, the maximum contribution that can be made to a SEP-IRA is 25% of compensation (or 20% of self-employed earnings net of the self-employment tax deduction) of up to $270,000, challenge to a contribution cap of $fifty four,000. (The 2018 limits are $275,000 and $55,000, respectively.)

SEP Tax Benefits: Simple to Set-Up

A SEP is established by way of completing and signing the quite simple Form 5305-SEP (“Simplified Employee Pension — Individual Retirement Accounts Contribution Agreement”). Form 5305-SEP isn’t filed with the IRS, but it need to be maintained as a part of the online accounting services in tampa permanent tax facts. A copy of Form 5305-SEP need to receive to each worker included with the aid of the SEP, alongside a disclosure announcement.

Additional rules and bounds do apply to SEP tax blessings, but they’re generally a good deal less hard than the ones for different retirement plans. Contact us to analyze extra approximately SEPs and the way they could lessen your tax invoice for 2021 and past.

Inaya Kapoor

I'm a SEO Executive. The company is a leading global information technology, consulting and business process services company.