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Category: Tax Questions

SEP, SIMPLE, and Qualified Plans

A SEP, or Simplified Employee Pension, is a written plan that allows you to make contributions toward your own retirement and your employees’ retirement without getting involved in a more complex qualified plan.  Under a SEP, you make the contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee.  A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained.  SEP-IRAs are set up for, at a minimum, each eligible employee.  A SEP-IRA may have to be set up for a leased employee, but does not need to be set up for excludable employees.

A SIMPLE IRA, or Savings Incentive Match Plans for Employees, is a retirement plan that uses SIMPLE IRAs for each eligible employee. Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee.

A SIMPLE 401(k) plan is a qualified retirement plan and generally must satisfy the rules discussed under Qualification Rules, including the required distribution rules.

A qualified plan is a retirement plan that offers a tax-favored way to save for retirement.  You can deduct contributions made to the plan for your employees.  Earnings on these contributions are generally tax free until distributed at retirement.  Profit-sharing, money purchase, and defined benefit plans are qualified plans.  A 401(k) plan is also a qualified plan.

To display instructions for entering SEP, SIMPLE & Qualified Plans in the tax program click here.

NOTE: This is a guide on entering SEP, SIMPLE & Qualified Plans into the TaxSlayer Pro program.  This is not intended as tax advice.  For additional information refer to the Additional Links below.

Additional links:
Publication 560, Retirement Plans for Small Business
Publication 590, Individual Retirement Arrangements (IRAs)

Last Updated: 5/2/2018

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