SEP contribution


G

gail

I have two business/sole proprietor. For one I file a
Schedule C. It is profitable. The other is farming (I file
Schedule F) which almost always has a loss. I combine the
two incomes and file a SE which means that my SS taxes are
reduced by the farming income (loss). I have a SEP
associated with the Schedule C business and I put 20% of the
profit each year into my SEP. I called the IRS three times
and each time they said this was correct even tho it is not
20% of the total on the SE. Is this correct? And why
can't I save 25% like most do on a SEP? Is there a better
retirement Plan?
 
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V

Victor Roberts

I have two business/sole proprietor. For one I file a
Schedule C. It is profitable. The other is farming (I file
Schedule F) which almost always has a loss. I combine the
two incomes and file a SE which means that my SS taxes are
reduced by the farming income (loss). I have a SEP
associated with the Schedule C business and I put 20% of the
profit each year into my SEP. I called the IRS three times
and each time they said this was correct even tho it is not
20% of the total on the SE. Is this correct? And why
can't I save 25% like most do on a SEP? Is there a better
retirement Plan?
You are saving 25%. When you put 20% of the pre-SEP amount
into the SEP it means the SEP is then 25% of the net amount.

Start with $1000. Put $200 into a SEP. That leaves $800 for
you. $200 is 25% of $800.
 
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