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SEP IRA Rules

What is a SEP IRA?

A SEP IRA (Simplified Employee Pension Individual Retirement Account) is a simple employee pension plan that gives employers an easy method to contribute towards the employee’s retirement. It also helps an individual to contribute towards his/her own retirement in the case of self employment. Contributions in a SEP IRA may be made directly into the Individual Retirement Account or Annuity that is established for each of the employees. Read below to find answers from the thousands of Experts.

Can contributions be made to an SEP IRA plan on the basis of the 1099 income?

It may be possible to make contributions to a SEP IRA plan on the basis of the 1099 income if the income is reported as a sole proprietor or independent contractor income on the Schedule C.

Is it possible to invest the IRA income into real estate?

It may not be possible to invest the IRA income into real estate directly. In order to invest it, one will have to take the money out of the IRA and pay taxes on it before making the investment.

Do SEP IRAs provide an individual protection from individual’s creditors?

In most situations, SEP IRAs may not provide an individual protection from an individual’s creditors. One may find more information about this on the following link:
http://benefitslink.com/modperl/qa.cgi?db=qa_distribtax&id=23

Is it possible to contribute to a Roth IRA, a 401 K plan and an SEP IRA at the same time?

It may be possible to contribute to a Roth IRA, a 401 K plan and a SEP IRA at the same time as long as the requirements for all three are met.

Is there is limit on the contributions made to an SEP IRA?

An employer may not contribute more than 25% of the employee’s compensation annually to an SEP. The contributions may have to be made in cash and one may not contribute property to the IRAs.

Would the owner of a Limited Liability Company (LLC) who earns through 1099 be required to set up SEP IRAs for all of their employees as well?

The owner of an LLC may not be expected to set up SEP IRAs for all the employees of an LLC. The owner may only set it up for themselves. This is because the owner is paid through the 1099 and hence considered an independent contractor. The employees of the LLC may not be considered to be his/her employees.

Would it be legal for the custodian of an SEP/IRA account to charge the employee for the different accounts?

It may be considered legal for the custodian of an IRA account to charge the employee for the different accounts if there is a written agreement permitting these charges.

SEP IRAs are one of the different kinds of IRAs that are available to individuals. Though these are simple pension plans, one may find it difficult to understand all the legal aspects involved in establishing and maintaining these plans. One may have many questions about the eligibility for these plans, how to set them up and how to contribute to them among others. One may ask an Expert and get more information in such situations.

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