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What is SEP IRA? SEP IRA is a retirement savings plan designed for small employers and self-employed individuals. Can I set up such a plan? Unlike other retirement savings plan, SEP IRA can be set up by any employer, including S. Corporations, C. Corporations, Limited Liability Companies, sole proprietorships and partnerships. If you have self-employment taxable profits you can establish and contribute funds to a SEP-IRA, even if you have no other employees and even if you are covered by another employer's retirement plan (e.g. you have 401K through your full time employer and 1 SEP IRA through you self employment business), to use it in your tax return, please click here.
How much can you claim as SEP IRA tax deduction? the IRC puts a limit of 25% of compensation for the amount you can claim as an income adjustment but no more than 25% of $49,000 for 2009. When do I need to contribute the funds into the SEP IRA? SEP-IRA plan must be established and the contributions made by the due date of your tax return (e.g. self employed person filing IRS Form 1040 for 2009 must set up the plan and fund it by April 15, 2010) or if extension was timely filed, by the extended due date of the following year (e.g. self employed person filing IRS Form 1040 for 2009 and filed extension request IRS form 4868 not later then April 15, 2010, must set up the plan and fund it by April 15, 2010).
Where do I report SEP IRA tax deduction? The SEP IRA tax deduction is really an adjustment to the income and not part of the Standard or Itemized deductions. It is reported on form 1040 line 28.
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