GLOSSARY · INCOME & SELF-EMPLOYMENT
SEP IRA
A retirement plan funded only by employer contributions, simple to open and run, and often used by the self-employed. A sole proprietor can contribute up to about 20% of net self-employment earnings within an overall yearly limit. If the business has eligible employees, it must contribute the same percentage of pay for them.
Also called: simplified employee pension, SEP plan
FORMULA
Contribution (sole proprietor) ≈ 20% × (net profit − ½ self-employment tax)
LEARN IT PROPERLY
CHAPTER · SIDE INCOME & FREELANCING MASTERY · DEEP DIVEA Money System for Irregular IncomeRELATED TERMS
SOURCES
- Simplified Employee Pension plan (SEP). Internal Revenue Service.
- Publication 560, Retirement Plans for Small Business. Internal Revenue Service.