How can I choose between simple and SEP IRA?

The owner of the company who is trying to choose between the simple and SEP IRA must know something about these two plans and how they differ. The use of the best choice between these two types of IRA or individual pension accounts may depend on several variants, such as whether the company has employees and how much net income it does annually. Further considerations may include any limits of contributions, tax consequences or early withdrawal from the consumption associated with specific IRAs. These plans usually cover businesses with less than 100 employees if there is no other pension plan. The employer may choose to be involved in the account up to 3 percent of the salary, or contribute 2 percent of the salary for each employee account, regardless of the employee's top contribution. Individual owners could contribute up to $ 11,500 net income - up to $ 14,000 if they are more than 50 years old - for 2010.

SEP or Simplified PrinterEmployee feasts, IRA are more often used by highly earned entrepreneurs who do not have employees. These plans allow the owner to contribute 25 percent of net earnings, up to $ 49,000 in 2010, to the account. The term "net income" means gross income minus costs, deduction for half the paid tax on self -employment, as well as the amount of IRA SEP contribution for a given year. The second amount may be quantified because the account can be set up a year after the year of the post, if introduced by April 15 or, if extended, October 15.

There are several differences between simple and sep IRA. While both of them have a fine if the account is selected in the first two years of its existence is higher - 25 percent - for simple IRA than for IRA SEP, which is made 10 % fine from the withdrawal. Although simple IRA plans can be financed up to 15 October of the next tax year, the law states that the plan must be set within 1 October of the Tax Year of the Tax Year.

the greatest difference limitEven a simple and SEP IRA is the amount that the company owner can contribute to these accounts deferred tax, which is entirely dependent on income. For entrepreneurs with a net income of less than $ 46,000, $ 11,500 or $ 14,000 can double the annual IRA contribution, as the owner can contribute as an individual and correspond to the company. IRA SEP would allow only $ 11,500 at the same level of income. The most important difference between the simple and the IRA SEPs is when the net income is relatively high: a net income of $ 196,000 provides $ 49.00 0 maximum contribution according to SEP rules, while with a simple IRA plan, the level of the contribution has not changed. Participants of both plan can also contribute to traditional or Roth IRA.