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SEPs


What’s an SEP, you ask?


→ SEP = Self-Employed Tax Pension plan


The SEP is a formal, written tax-deferred retirement savings plan adopted by an employer (both self-employed and small business owners). 


It also allows your business to make tax-free contributions to an individual retirement account for each of your employees if you have them! SEPs are funded solely by the employer using TAX-DEDUCTIBLE dollars. Yes, you heard that right - your business can pay for your retirement!


In a nutshell, here’s how it works: 

  • Employers can contribute up to 25% of each employee's annual compensation.

  • Self-employed persons can contribute up to 20% of their net self-employment earnings towards their own account.

Soooo why choose this route? 

→ Unlike other retirement plans, SEP plans do not offer Roth or post-tax contributions. 


Some of the benefits of a SEP:

💥 Can be funded as late as the due date of the tax return (with extensions) for a specific tax year 

💥 Employer-only contributions fund the IRA even if employee contributes nothing

💥 This is typically less complicated and less expensive to maintain than other small business retirement plans 

💥 Employees are always 100% vested

I could go on and on about SEP for a WHILE. But this is just the bite-sized version to get you started.


Want to know more? Let's chat!


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Your Tax Coach is a boutique tax accountancy and tax strategy firm for US-based entrepreneurs and online business owners who want to save money on their taxes.

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