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SEP or SIMPLE? Not always an easy choice

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in Small Business Tax,Small Business Tax Deduction Strategies

In the not-so-distant past, retirement plan options for small business owners were relatively limited. But now you have a wider range of qualified plans at your disposal.

Strategy: Compare the Simplified Employee Pensions (SEP) to the Savings Incentive Match Plan for Employees (SIMPLE). Both of these popular plans offer ease of administration and relaxed reporting requirements.

Summary of SEPs

Eligibility: With a SEP, contributions must be made for all employees age 21 and over who have worked for your company full time three out of the previous five years (absent any other union agreement). Part-time employees, or those who worked for the company only part of the year, must be covered under the plan if they earn over $600 in 2018.

Contribution limits: For 2018, the maximum deductible contribution limit per participant is the lesser of (a) 25% of compensation or 20% of self-employment income or (b) $55,000 (the same as m...(register to read more)

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