I AM SELF-EMPLOYED. HOW DO I SET UP A SEP?..
Country/State/Province of question: VIRGINIA
CALLED MY BANK
You need to decide where you want to maintain the plan, a brokerage firm or a bank are the usual places. Most all of them have prototype plans & you simply fill out an adoption agreement & you're off & running.
Do you have any employees?
NO I AM A CONTRACTOR WORKING AT AN HOURLY RATE
BUT I DO WORK FOR A BANK
If not, you might want to consider an "Individual 401-K Plan". Again, there are prototype plans available, more likely from a brokerage firm; the main advantage is that with a 401-K, you can borrow from the plan assets down the road if you need to do that without creating a tax liability.
Are you an employee of the bank?
Are you covered under a retirement plan or 401-K there?
I am 69 years old and lucky to have this job. I am getting a CHASE LIQUID CARD TO PAY FOR GAS.
BANK PAYS ANY TRAVEL EXPENSES I MAY HAVE
I DON'T WANT TO GET HIT WITH A SELF-EMPLOYED TAX AT THE END OF THIS YEAR.
You can't avoid that.
I'M RELUCTANT TO DO BUSINESS WITH THE BANK I WORK FOR.
Are you completely self employed?
There are plenty of banks around, as well as brokerage firms.
CAN'T I DECREASE TAX LIABILITY BY FUNDING MY OWN SEP?
You need to answer my questions.............
YES I M COMPLETE SELF EMPLOYED. I ALSO GET SOCIAL SECURITY
So, some of your social security may be taxed, now.
I AM NOT AN EMPLOYEE OF THE BANK. I HAVE MY OWN HEALTH CARE PLAY
It all depends upon what your adjusted gross income is;
OK, I understand
Approximately how much do you think you'll earn in 2012?
CAN I DEDUCT MY HEALTH CARE COSTS?
I AM NOT AN EMPLOYEE OF THE BANK. I AM A CONTRACTOR
I heard you the first time
But all these questions revolve around how much you earn
AGAIN, I DON'T HAVE EMPLOYEES
I understand; how much do you expect to gross in self-employment income?
ARE WE DONE? CLARK HOWARD ON THE RADIO MENTIONED PLACES WHERE I COULD SET UP A SEP. WHAT ARE THEY?
SHOULD I CONTACT FIDELITY?
As I said, most banks or all brokerage houses have prototype plans
ARE WE DONE?
Fidelity has a good reputation;
You need to decide what you want to invest in;
You realize a SEP is an IRA, right? It just has higher contribution limits.
NO I DIDN'T KNOW
I AM 69. WHAT ARE THE LIMITS?
If you tell me what you expect your gross income from your self-employment is, as well as your monthly social security check, I can tell you want I think you should do,
I HAVE A SELF-DIRECTED IRA AT OPTIONS EXPRESS
CAN I JUST DEDUCT CONTRIBUTIONS MADE TO THAT?
sure if you have sufficient income
Well, here's what you should do before you do anything;
I AM A WIDOW
OK, sorry to hear that; I didn't know if you were male or female
WHAT IS AN ADOPTION AGREEMENT?
Believe it or not, because you are self-employed and are earning that amount of money, you have a
fairly complicated return; not to us, but it will seem that way to you;
At least 50% of your social security will be taxable; so you'll have $8,000. of income to be taxed without getting any more money
I got female with the widow
You will be able to shelter some of your taxable income with a larger retirement plan contribution, but the plan you choose must be co-ordinated with your existing IRA
HOW CAN I REDUCE TAX LIABILITY ON WHAT I EARN. THAT'S WHAT I THOUGHT A SEP WOULD DO
Deductions for health insurance are handled differently when you are self employed
CAN I DO THAT THROUTH OPTIONS EXPRESS?
Plus several other things will be different
Before you do anything, you should sit down with a local CPA, bring in your last year's return & the information for this year re your self-employment income, social security, medicare premiums, supplemental health insurance premiums; prescription drug premiums if you have that.
OK, THEN WHAT?
You need to get an estimate of your 2012 taxes & determine your retirement plan funding options & you should be making estimated payments or you will be penalized at the end of the year;
We can't do that here in this forum for obvious reasons; we don't have all the data for one thing;
You already missed 2 estimated payments; so this is something you need to get squared away or you won't be a happy camper next April,
OK, I NEED TO TALK TO A CPA FIRST. AND BEGIN MAKING ESTIMATED TAX PAYMENTS.
WHAT ABOUT CONTRIBUTINT TO MY EXISTING IRA?
As an example, your initial question was how do I set up a SEP? I answered that, but as you can see it leads to more important matters that need to be addressed first.
You have plenty of time to make retirement plan contributions
don't worry about that until you can figure out what the contribution's tax saving will be;
I THINK I GET IT NOW.
You'll be lucky if it saves you 20% at the most
So it doesn't wipe everything out;
I'LL ASK THEM ABOUT OPTIONS EXPRESS CONTRIBUTIONS.
The part about the 8,000. of additional income from part of your social security being taxed, will probably add $1,500 to your tax bill for that item alone
It is a killer; I know, because I have the same problem
If you have any more questions later on, you can always come back here & ask for me. Just put Steve G. at the beginning of your question.
Please remember to rate me so that I can get credit for my answers.
Thanks very much.
THANK YOU, STEVE G.
You are welcome.
All you need to do is click on one of the smiley faces.
Do you have a question?
NO WE ARE DONE.
OK, so you need to rate me by clicking on one of the smiley faces
Extensive Experience with Tax, Financial & Estate Issues