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Scott sez:

Wow! Fun stuff! Assuming the numbers were run right, I'm surprised at how competitive the SIMPLE is with the SEP - it looks like about $55k of earnings is where the SEP starts to pull ahead, where I would have thought it would be around $40k. That $6k base is powerful. I'm also starting to see the point about not letting your wife (Jen, in this case :-) do pro bono work for your sole proprietorship.

Good analysis. I haven't run the numbers myself, but that's the approach to take. Keep one thing in mind about the SIMPLE, though. Unlike the SEP where you can skip payments for years on end, you don't have that freedom in the SIMPLE. As the employER, you will have to contribute in unprofitable years as well whether you use a nonelective contribution or match. Plus there's a tad more paperwork involved. Despite that, it can still make for a good approach to tax deferral in many cases.


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