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I am self employed and am considering a SEP IRA. How much $ can I contribute each year? Whats the difference between a SEP and Simple IRA? Will this affect my existing Roth IRA contribution of $2000?
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In general, the SEP contribution starts at 15% of SE (self-employment income) adjusted for Social Security payments. As a result, the true percentage floats a bit approx 12.5% to 14.5% of pay depending on the level of pay.

The amount is tax deductible --- actually it is a reduction in taxable income, meaning that you do not have to itemize deductions --- it goes on line 28, 1040 page 1.

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[[I am self employed and am considering a SEP IRA.]]

Good for you...

[[ How much $ can I
contribute each year?]]

It'll be based upon your net Sch C income. Figure about 13.0435% of your net Sch C income, to a maximum of $24,000.

[[ Whats the difference between a SEP and Simple IRA?]]

A bunch. I have posted informaton on both in the Taxes FAQ area. You might want to check it out for additional information. You can also read more about these plans by reading IRS Publications 560 and 590. It'll explain the differences to you in much more detail.

[[ Will this affect my existing Roth IRA contribution of $2000?]]

Nope...not at all.
TMF Taxes
Roy

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considering a SEP IRA ... How much $ can I contribute each year?

TMFTaxes Date: 1/24/99 8:09 PM Number: 8855
It'll be based upon your net Sch C income. Figure about 13.0435% of your net Sch C income, to a maximum of $24,000.

I'm also self employed and presently have two Keogh Plans - a Profit Sharing Plan and Money Purchase Plan. This allows me so contribute 20% instead of 13.0435%. But the plans are with the bank's high commission brokerage house, so I'm considering moving them. Preliminary research turns up only one type of SEP at discount brokerages.

It would seem to me I need an SEP-PS and an SEP-MPP to match my present situation - do these exist? Or something equivalent?
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[[ I'm also self employed and presently have two Keogh Plans - a Profit Sharing
Plan and Money Purchase Plan. This allows me so contribute 20% instead of
13.0435%. But the plans are with the bank's high commission brokerage house,
so I'm considering moving them. Preliminary research turns up only one type of
SEP at discount brokerages.

It would seem to me I need an SEP-PS and an SEP-MPP to match my present
situation - do these exist? Or something equivalent?]]

Nope...sorry William. About the only thing that you can do is try to move your Keogh administration to a more "user friendly" broker.

Your SEP account will limit your decuctions when compared to a keogh. Only you will be able to determine if your broker fees are enough to take the tax "hit" on the reduced contribution.

Sorry...
TMF Taxes
Roy
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William Lipp
It would seem to me I need an SEP-PS and an SEP-MPP to match my present situation - do these exist? Or something equivalent?

TMFTaxes Date: 1/25/99 7:51 AM Number: 8901
Nope...sorry William. ... Your SEP account will limit your decuctions when compared to a keogh.

Could I go part way? Could I replace the Keogh-PS with an SEP and still keep the Keogh-MPP?

I guess I need to do a scan of discount brokers looking for Keogh plans.
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I am trying to understand Keogh plan tax implications. It seems that for propriators the deductible limit is always less than contribution allowed. As in the previous example, William mentioned 20% contribution. Does that mean that if you contribute 20% to MPP it is fully deductible, or again you have to use a formula to devise a deductible portion? Also, many people make 15+10 split between profit sharing and money purchase plan. Is the nondeductible portion subject to excise tax?
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On 25 Jan 99, at 8:06, Jeff Adams wrote:
I am trying to understand Keogh plan tax implications. It seems that for propriators the deductible limit is always less than contribution allowed.

Yes. The "nominal" percentage is the percentage of the profit not including the Keogh or SEP contribution itself. So a 15% contribution and $100 profit allows you to contribute $13.04 because $13.04 is 15% of (100-13.04).

As in the previous example, William mentioned 20% contribution. Does that mean that if you contribute 20% to MPP it is fully deductible, or again you have to use a formula to devise a deductible portion? Also, many people make 15+10 split between profit sharing and money purchase plan.

You need the formula. But I already applied the formula in the example. I have the 15+10 you discuss, for a nomimal 25%. So I can contribute $20 for every $100 because $20 is 25% of (100-20).

Is the nondeductible portion subject to excise tax?
I never made a nondeductible contribution, so I know nothing about it.
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[[Could I go part way? Could I replace the Keogh-PS with an SEP and still keep
the Keogh-MPP?]]

Sorry again, William. But you can't mix and match types of plans. That would be a wonderful world...but it's just not allowed by Uncle Sammy.

I think that a broker search would most likely be in your best interest.

Again...sorry...
TMF Taxes
Roy
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[[I am trying to understand Keogh plan tax implications.]]

Then you might want to visit the IRS web site and read more about the various plans for the self employed in IRS Publication 560.

[[ It seems that for
propriators the deductible limit is always less than contribution allowed. As in the
previous example, William mentioned 20% contribution. Does that mean that if
you contribute 20% to MPP it is fully deductible, or again you have to use a
formula to devise a deductible portion?]]

You might want to take these questions over to the Retirement Investing folder, hosted by TMF Pixy. Pixy is our retirement plan maven, and will know much more about these issues, since he works with them on a daily basis. But I'll tell you what I know.

You would still have to use a formula. For self employed people, the pension contribution is always based upon net income, and there are some funny Social Security computations. So a formula is involved (if I understand your questions).

[[ Also, many people make 15+10 split
between profit sharing and money purchase plan. Is the nondeductible portion
subject to excise tax?]]

Now you are out of my element. I have a pension plan administrator that I work with (like Pixy) that I would take this question to. I believe that the non-deductible portion is subject to an excise tax, but I'm really not sure. This is really a Pixy question. Sorry.

TMF Taxes
Roy
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