SEP IRA Rules Encouraging Small Business Participation

SEP IRA rules make this type of retirement account very appealing to small businesses. Here are a few factors in an SEP IRA that encourage many small businesses to participate.

No Annual Reports

With qualified retirement plans such as a 401k, you have to file an annual report with the IRS. With an SEP IRA, there is no such paperwork required. This makes maintaining the SEP IRA very easy for small businesses that do not want a lot of extra paperwork.

Discretionary Contributions

Another advantage of this type of plan is that you can decide whether or not you want to contribute on a yearly basis. If you go through a down period in your business, you can decide to not contribute anything to your employees accounts. This provides you with supreme flexibility when it comes to contributing to employee retirement accounts.

Tax Advantages

There are certain tax advantages that come with setting up and contributing to an SEP IRA. When you set up this type of retirement account, you might be eligible to receive a $500 tax credit in each of the first three years of the plan. In addition to that, you get to deduct any contributions that you make to employee accounts from your taxable income.

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