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By Tina Moe, CPA

Retirement

Strategy for the

Self-employed

Employee

S

aving for retirement is a goal for most

Americans but, did you know that

if you’re an employee contributing

to a 401k or a 403b AND you have a side

business, you may be able to contribute

additional funds to another retirement

plan? I recently received a question from a

client, Nina, a local college professor and she

asked “I contribute to my 403b plan through

the University but I’d like to contribute more

if I can. I have a consulting business on the

side where I file schedule C and I have do

profits. Can I contribute to a SEP IRA and if

so, how much can I contribute?

That’s a great question and creates a

wonderful opportunity for those who may

be in this same situation. I want to first

clarify what the maximum contribution

limits are for your 403B plan in case anyone

else wants to know. It’s $18,000 if you’re

under the age of 50 or $24,000 if you’re 50

or older and this is all tax deferred meaning

you’re setting this money aside before

paying any federal, state and local income

taxes. This is good stuff!

Now let’s look at Nina’s question about

contributing to a SEP IRA in addition to her

403B contributions. You can contribute

to a SEP IRA if the following conditions

are met: Your business has profits and,

assuming you don’t have any employees,

you can contribute up to 20% of your net

schedule C income, after one-half of your

self-employment tax deduction, up to a

maximum of $53,000 in 2015.

HERE’S AN EXAMPLE:

Nina’s Consulting Business – Schedule C

Gross receipts

$150,000.00

Business expenses ($100,000.00)

Net Income

$ 50,000.00

½ SE Tax

($ 7,650.00)

this reduces the amount of income for the

contribution calculation

Income for SEP 20%

$ 42,350.00

SEP Max Contribution $ 8470.00

(20%of$42,350.00)

SOAR TO SUCCESS

| AUGUST 2015 |

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