A beginner's guide to Simplified Employee Pension Plans (or SEPs)

Many small business owners want to save for retirement for themselves, and help their employees save for retirement as well. Rather than going through the involved (and sometimes quite expensive) task of setting up a 401(K), small business owners can take advantage of one of two different plans the IRS offers that are easy to set up and administer.

This video explores one of these plans: The Simplified Employee Pension Plan or SEP. The video covers the plan itself, how it works, and how to report the contribution on the business owner's tax return.

SECURE 2.0 UPDATE: Employer contributions to SEPs may now be made to Roth accounts.

0:00 Introduction
0:37 SEPs: What they are and how they work
3:49 An example is in order
5:59 Reporting SEPs on tax returns
6:57 Conclusion

To learn about the difference between traditional and Roth retirement plans, click here:    • Traditional or Roth?  

Unsure as to what a Schedule K-1 is? Click here:    • K-1's (for Beginners!)  

Resources and Additional Information:

IRS Publication 560: "Retirement Plans for Small Businesses": https://www.irs.gov/pub/irs-pdf/p560.pdf

IRS Form 5305-SEP: "Simplified Employee Pension--Individual Retirement Accounts Contribution Agreement": https://www.irs.gov/pub/irs-pdf/f5305...

IRS Schedule C (Form 1040): "Profit or Loss from Business": https://www.irs.gov/pub/irs-pdf/f1040...

IRS Form 1065: "Return of Partnership Income": https://www.irs.gov/pub/irs-pdf/f1065...

IRS Schedule K-1 (Partnership): "Partner's Share of Income, Expenses, Credits, etc.": https://www.irs.gov/pub/irs-pdf/f1056...

IRS Form 1120-S: "U.S. Income Tax Return for an S-Corporation": https://www.irs.gov/pub/irs-pdf/f1120...

IRS Form 1120: "U.S. Corporation Income Tax Return": https://www.irs.gov/pbu/irs-pdf/f1120...

Nerdwallet: "What Is a Simplified Employee Pension Plan? How SEP IRAs Work": https://www.nerdwallet.com/article/in...

Wolters Kluwer: "SEPs are the easiest way to provide employees with retirement benefits": https://www.wolterskluwer.com/en/expe...

The Tax Geek on the Site Formerly Known as Twitter: @taxgeekusa

The Tax Geek on Reddit: www.reddit.com/r/askataxgeek

Image and footage credits:

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NO OTHER ARTIFICIAL INTELLIGENCE WAS USED TO WRITE, EDIT, ANIMATE, VOICE, OR EDIT THIS VIDEO

Intro Music: "Bluesy Vibes" - Doug Maxwell - YouTube Creator Music

Outro Music: "Modern Attempt" - Track Tribe under license from YouTube Creator Music

DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or financial advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or financial professional.