SEP IRA

We all know that we need to save for retirement, and a SEP (Simplified Employee Pension) IRA is an account designed for just that. Think of it as your own personal pension plan. The more you fund it, the better chance you’ll have at retiring someday on your terms – not someone else’s.

A SEP is an ideal retirement plan for a one-person company or a small business. Contributions are made by the company.  Employee contributions are not permitted.

Why choose a SEP IRA for your business?

• A SEP IRA can be set up easily and quickly.
• As a sole proprietor, you can take a tax deduction for your SEP IRA contribution. As a corporation, the company takes the deduction.
• Contributions are optional from year to year.
• A SEP IRA is easy to administer.

How do I set up a SEP IRA for my business?

• To establish a SEP IRA, download, print and complete the IRS Form 5305-SEP IRA Agreement. Employees who have worked in three of the previous five calendar years must be allowed to participate.
• Distribute copies of the SEP IRA Agreement to eligible employees and instruct them to open a SEP IRA at Sit Mutual Funds, with the Sit IRA Application, or an institution of their choice.

• Contributions are made by the company. The company contributes the same percentage of pay to each eligible employee’s SEP IRA.
• The 2023 contribution limit is the lesser of $66,000 or 25% of compensation.
• The 2024 contribution limit is the lesser of $69,000 or 25% of compensation.
• Contributions are fully vested.
• Annual contributions are not required.

• When using the IRS Form 5305-SEP Agreement, each employee’s contribution should be the same percentage of their pay.
• If your business is not incorporated, a user-friendly worksheet is available to calculate your SEP contribution. Be sure to verify the accuracy of your calculation with a qualified tax professional.

• Contributions can be made for the prior year until the employer’s tax filing due date, including extensions.
• Unincorporated business owners deduct their own contribution on IRS Form 1040 Schedule 1.
• Incorporated business owners deduct all contributions on their corporate tax return.

• The annual Sit custodial fee is waived if your account balance is $10,000 or more.
• The annual Sit custodial fee is $15 if your account balance is less than $10,000. We will notify you in November and you may pay the fee then or, if unpaid, we will deduct the fee in mid-December for your convenience.
• If your Sit account balance is less than $10,000 when you close your Sit IRA, the $15 fee will be deducted from your check.

• Contributions are reported on IRS Form 5498 (“IRA Contribution Information”), which Sit mails to you in May.
• Redemptions are reported on IRS Form 1099-R (“Distributions from IRAs”), which Sit mails to you in January.