Anyone here familiar with an SEP IRA? Need advice....

[bbhaag]

So I'm looking too save a little on my tax bill and my accountant mentioned that setting up an SEP IRA for my business might be a way too do it. Does anyone here have some experience in setting one up for a small business?
I'm not sure what I need too say so too give an idea the business is set up as an LLC taxed as an Scorp. It's a partnership between me and my brother with both of us owning 50% each of the business and its assets. We have one full time employee and 3 full time seasonal employees who work from February 14 too July 30th then are laid off for the season. We also have around 10 to 15 full and part time seasonal employees who work from March to around the end of May. Some of them come back from one season to the next but most move on because it's a very temporary job.

So if anyone here has a SEP IRA in place what are some of the up sides and downsides that you've experienced? Do you see a significant tax savings from year too year? How many employees do you have in it and how many of them are full time year around vs seasonal?

Anyway, I'm droning on here and before long it's going too become a wall of text so before that happens let me know what you guys think of an SEP IRA. Good and bad. Also if you need too ask anymore questions just ask. I will answer them the best I can.

One more thing. Yes I've googled the hell out of this and talked too my accountant but I wanted to get peoples opinions who have actually done this.

 

[RLGL]

Have a professional do it

 

[bbhaag]

Ok that's good advice. We are having our accountant and a professional financial adviser geared more toward small business' looking into it. The financial adviser is through our bank and he also said it's a good idea too set up and SEP IRA but mentioned that because we have such a small employee base that our SEP IRA might become "top heavy". I guess the IRS frowns upon that but it's not unheard of for a business our size and there do seem to be work arounds.

So point taken on getting a professional to do it. I thought I had made that clear in my op but I guess I did not. Anyone with personal experience is more than welcome too chime in. I would really like too hear from those who have set one up as an employer or those who are vested in one as an employee.

 

[JEDIYoda]

No but I did have a BIG MAC!!

 

[Jeeebus]

I have a SEP IRA in place which is great for me. I think I socked away something like $30k in it last year. Doesn't require any magic - just pick up phone, call Fidelity (or whoever you want it with), and ask for SEP IRA to be setup. Took all of 5 minutes.

The only problem I recall was that you are required to fund a SEP IRA for each of your employees that qualify - I believe in the same amount that you contribute to yourself.

Must part time and seasonal employees be included in the SEP IRA?
Yes, if they earned $600 or more in 2015 and worked for the business in 3 of the past 5 years and they are age 21 or older (2016 compensation limit is $600). Non resident aliens may be excluded. When a SEP IRA is established a short form called IRS Form 5305 is completed which states the eligibility requirements. The requirements can be less restrictive than the above stipulations, but can't be more restrictive.

This wasn't a problem for me, but can become a problem when you have several employees.

 

[bbhaag]

How many employees do you have enrolled in your SEP? So far it's looking like 7-8 for us. We were thinking about depositing $15k to start the IRA. We were looking too set this up through our local credit union. They offer it and most of our employees that are eligible are already members of that credit union.

We are aware of the requirement to fund every employee that is eligible. We were not aware that it should match what we contribute to ourselves. We were under the impression that distributions from the SEP were a percentage based on wages earned over the year. That is something we will have too look into.

I don't mean too pry but what do you do for a living?

 

[Jeeebus]

I am a lawyer.

 

[bbhaag]

That's what I thought. If you don't mind me asking what state do you practice in?