If you're a sole proprietor or small-business owner, a Simplified Employee
Pension-Individual Retirement account is an easy-to-administer plan that
permits you to set aside money for retirement in a tax-deferred account.
As a sole proprietor, you may contribute the lesser of 20% of your
profits from self-employment (net profit minus one-half of your
self-employment tax) or $40,000. If your business is incorporated, you may
contribute the lesser of 25% of compensation or $40,000. You can also make
"employee," or personal, contributions to your account of up to $3,000 for
tax-year 2003, plus up to $500 in additional contributions if you're age 50
or over. (These are the same limits that apply to a traditional IRA or Roth
IRA; note that personal contributions to traditional IRAs, Roth IRAs, and
SEP-IRAs combined can't exceed this limit.) These personal contributions
can be either deductible or nondeductible, depending on your income and
other factors.
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