News & Articles

There's Still Time to Set Up a SEP for 2016

Posted on Mon, Mar 06, 2017

Simplified Employee Pensions (SEPs) are stripped-down retirement plans intended for self-employed individuals and small businesses. If you don't already have a tax-favored retirement plan set up for your business, consider establishing a SEP — plus, if you act quickly enough, you can claim a deduction for your initial SEP contribution on your 2016 tax return.

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Tags: SEP, Retirement Plan, Business Owner

Avoiding the 10% Penalty on Early IRA Withdrawals

Posted on Wed, Apr 06, 2016

For one reason or another, you may need to take some money out of an IRA before reaching retirement. You can withdraw money from an IRA at any time and for any reason, but it's important to keep in mind that most IRA withdrawals are at least partially taxable. In other words, you'll owe regular income tax on the amount. In addition, the taxable portion of a withdrawal taken before age 59 1/2, which is called an "early withdrawal," will be hit with a 10% penalty — unless you qualify for an exception.

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Tags: Traditional IRA, Health Insurance, Higher Education, SEP, IRA

Five Last-Minute Moves to Lower Your 2015 Tax Bill

Posted on Mon, Feb 29, 2016

Tax Day is right around the corner. Have you filed your federal tax return yet? The filing deadline to submit 2015 individual federal income tax returns is Monday, April 18, 2016, rather than the traditional April 15 date. Washington, D.C., will celebrate Emancipation Day on Friday, April 15, which pushes the deadline to the following Monday for most of the nation. The deadline will be Tuesday, April 19, in Maine and Massachusetts, due to Patriots' Day.

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Tags: Traditional IRA, Sales Tax, SEP, Section 179 deduction

Squeeze More Out of a Company Simplified Employee Pension Plan (SEP)

Posted on Thu, Aug 21, 2014

If you want a retirement plan for your small company or self-employed business -- but you don't want to be buried in paperwork -- consider a simplified employee pension plan or SEP.

Among the appealing advantages:

1. SEPs are set up by simply filling out a brief form.

2. Annual reports aren't required to be filed with the IRS, although you must provide a copy of the SEP form to each covered employee. (Most retirement plans require detailed reports to be filed with the IRS and the Department of Labor.)

3. Contributions can go from zero to the maximum each year, so if your company has a bad year you can skip the contribution.

4. SEPs allow for "look-back" contributions. As an example, you can make a SEP contribution, up until the date you file your tax return (including extensions), and deduct that contribution on that tax return.

5. Employees make their own investment decisions. All SEP contributions are fully vested and portable. In fact, SEPs are sometimes referred to as SEP-IRAs. The maximum contributions are 25 percent of compensation for employees, or 20 percent of self-employment income for sole proprietors, partners and LLC members. The absolute maximum amount that can be contributed to an account and deducted is $52,000 for 2014 (up from $51,000 in 2013).

All in all, if you are a small corporation or self-employed, the ease of a SEP may simplify your life and help fund your retirement. Consult with your tax adviser for more information.

Despite the Advantages, there Are a Few Downsides:

All of the SEP funding comes from you. And you may have to contribute on behalf of employees that you'd like to exclude.

If you have a large, relatively high-paid work force, sponsoring a SEP can be expensive.

There is 100 percent vesting right away so you have little or no control over what each employee does with the money. If a staff member wants to take out their funds prematurely and pay the taxes and penalties right away, you can't prevent it.

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Tags: EHTC Article, Retirement, Retirement Accounts, SEP, Newsletter, Articles, Simplified Employee Pension Plan