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SEP IRA’s & Tax Savings – Did You Know?

sep-ira-small-business-tax-savings-out-of-the-box-wealth-advisors

SEP IRA’s & Tax Savings – Did You Know?

SEP IRA’s and tax savings – did you know that there are tax savings strategies involved with Simplified Employee Pension Plans? Out of the Box Wealth Advisors knows it! But that’s no surprise to us over at Out of the Box Technology. No surprise because our sister company specializes in small business investment strategies and all things related to wealth maximization. Good to know, right? But not what this article is about.

SEP’s, short for Simplified Employee Pension Plans, are great tools because they benefit both employees AND employers. These plans are available to companies of any size, ideal for small business, and come with tax saving benefits.

In this article, our SmartVestor Pros at Out of the Box Wealth Advisors are going to explain what a SEP is. Additionally, they are going to discuss a few tax saving benefits involving SEP’s. This is valuable information for small business owners who want to maximize their wealth while reducing taxable income. More importantly, this is valuable information for small business owners who want to simultaneously provide more wealth for their employees.

Read on to learn more about SEP IRA’s, tax savings, and how small business owners can take advantage of this win/win retirement strategy.

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what-is-sep-simplified-employee-pension-plan-ira

What Are SEP IRA’s?

First things first; what is an IRA? As defined by Investopedia, an IRA is a “…tax-advantaged account that individuals use to save and invest for retirement.”

Next, what is a SEP IRA? As defined by the IRS, a Simplified Employee Pension Plan (SEP) is a “…simplified method to contribute toward their employees’ retirement as well as their own retirement savings.”

So, what we have is an employee pension that allows for employer-only contributions into a tax-advantaged retirement account. Sounds pretty good so far!

sep-ira-small-business-tax-savings

Screenshot taken of irs.gov, “How does a SEP work?

SEP Benefits

It is important to understand what some of the most important benefits are before selecting a SEP IRA. Some of these benefits were not listed or fully explained in the image above, so we’re going to break it down to brass tacks.

Here are the most important benefits:

  • Cost efficiency that includes tax advantages for your business!
  • High contribution limits for you and your employees
  • Control to operate your plan according to your needs and preferences
  • Investments to help participants build a diversified retirement portfolio
  • Easy Maintenance means NO annual filings or disclosures required

sep-simplified-employee-pension-ira-benefits-and-strategies

SEP IRA’s & Tax Saving

Here is a brief description of some tax savings from sponsoring a SEP IRA.

Tax Savings
  • Contributions are made by the employer on a discretionary basis.
    • So you decide how much you’d like to invest for both yourself and your employees.
  • As a plan sponsor, you may be eligible for tax credit up to $5,000 per year, for the first three years!
    • The available credit allows $250 a year for each eligible non-highly compensated employee up to the annual limit of $5,000.
  • When you choose to make contributions to your retirement plan account, you also must contribute to each participant account.
    • All of those contributions are a tax-deductible business expense!
  • A SEP IRA allows you to invest far more than would be possible through a traditional or Roth IRA, or even a SIMPLE IRA plan.
    • Because of the plan’s high contribution limits, SEP IRAs tend to be particularly attractive to business owners looking to maximize their retirement savings.
Tax Strategy

In the introduction of this article we said that there is a win/win retirement strategy involving SEP IRA’s. The win/win SEP IRA strategy boils down to maximizing retirement for you and your employees, while deducting all participant account contributions as a business expense at tax time. Since contributions are made by the employer on a discretionary basis, you get to decide how much you would like to invest for both yourself and your employees. This allows you to align contributions with required tax deductions. This is great and all, but no one can predict the future! We certainly cannot, otherwise we would all be retired already!

Well, an SEP IRA plan can be established anytime before a tax-filing deadline (including extensions). So if you cannot predict the future either, then this could be beneficial for you. Our SmartVestor Pro says he cannot stress how often he has seen this help small businesses that may not know their financial condition until year-end. It sure pays to know where you stand come tax time!

Final Thoughts

Every business in completely unique. Every business has a unique culture and staff, as well as it’s own unique set of goals, challenges, and financials. Because every business is so unique, there cannot be a one-size-fits-all solution to financial planning. That means having a trusted partner that thoroughly understands investing, insurance, estate conservation, and preserving wealth is critical. Out of the Box Wealth Advisors specializes in helping individuals and business owners in developing sound retirement strategies. They offer personalized, hands-on service and they educate their clients about financial concepts and products, taking the mystery out of financial planning. We encourage you to speak with a SmartVestor Pro Today!


Check out our sister company, Out of the Box Wealth Advisors!


Out of the Box Technology is an Elite QuickBooks Solution Provider (QSP). We provide our clients QuickBooks products and end-to-end Business services and Data services through our talented team of ProAdvisor Advanced Consultants, possessing over 360 years of combined QuickBooks experience. Out of the Box Technology’s motto is “Anything + Everything QuickBooks, It’s really that simple.” Contact us and let us show you how simple it really is! And don’t forget to check out our Company Blog for Free Resources, valuable How-To’s, and TONS of frequently added QuickBooks content!

Speak with a SmartVestor Pro Today

Contact us for a FREE consultation with a SmartVestor Pro!

Our SmartVestor Pros have decades of experience in financial institutions and assisting individuals and business owners with their personal financial planning.

Speak with a SmartVestor Pro

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