Filing an extension will generally allow you to delay filing a tax return until October 15. You will still have time to establish a SEP-IRA and make a SEP-IRA contribution until the tax filing deadline.   Be sure to notify the IRA custodian to code the contribution for the prior year, if that’s your intention.

How is a SEP IRA different from a traditional IRA?

Contributions to a SEP-IRA are legally treated as traditional IRA assets, and as a result, are subject to many of the same rules as traditional IRAs. One of the most appealing features of SEP-IRAs is the large amount you can put away for retirement. All SEP-IRA contributions are considered employer contributions on behalf of employees.

When is the best time to open a SEP IRA?

The plan can be set up as late as the due date of your business income tax return for the year in which you want to establish the plan, including filing extensions if necessary. If you’re in a position to open up a SEP IRA then you definitely should. It’s one of the very best self-employed retirement plans available.

What’s the income limit for a SEP IRA?

Contributions made by employers cannot exceed the lesser of 25% of an employee’s compensation, or $55,000 maximum (for 2018). As with the Traditional IRA, withdrawals from SEP IRAs in retirement are taxed as ordinary income.

Can a self employed person contribute to a SEP IRA?

The Simplified Employee Pension Individual Retirement Arrangement ( SEP-IRA) is a great place for self-employed individuals to direct money for retirement. But it’s important to learn—and stay within—the legal contribution limits and deadlines. SEP plans provide business owners a vehicle for saving for retirement for themselves and their employees.

What happens if SEP contribution is not made by filing date?

If you didn’t make a proper estimate of your tax liability, the IRS can retroactively deny your extension back to mid-April. If your extension is denied retroactively, your due date to make a SEP or Keogh contribution also reverts back to April.