Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 02-20-2005, 07:24 PM   #21
Posts: n/a


I believe you're getting the SIMPLE IRA and SEP IRA confused. One allows deductions no matter the percentage; the other allows only up to 20% of self-employed income. So you CAN put up to $10,000 (for 2005) regardless of income into a SIMPLE.

Here's a table:
I looked around a lot on the web and I see the same 402(g) contribution limit everywhere. This is an example:

Question: If I make the maximum 401(k) plan deferral contributions with my employer, can I also make the maximum deferral contributions to a SIMPLE IRA plan for a side business that I have?

Answer: No, you cannot make the maximum salary deferral contributions to both. The salary deferral limit is a personal limit not just a plan limit. Under IRC Section 402(g) the 401(k) plan salary deferral limit for 2004 is $13,000. Under IRC Section 408(p) the SIMPLE IRA deferral 2004 limit is $9,000. Under IRC Section 402(g)(3) you must aggregate both types of deferrals and apply the $13,000 limit as an overall personal limit for 2004. However, if you contribute the maximum salary deferrals available to you and you are at least age 50 in 2004, your plans may also allow you to make additional catch-up contributions of $3,000 to the 401(k) plan and $1,500 to the SIMPLE IRA plan. For more information and to best determine your available opportunities have a tax or legal professional check your SIMPLE IRA plan document and the summary plan description for your 401(k) plan.

Will talk to the CPA at tax time, I am getting more and more confused. I think the IRS does not want people to have a side business with a whole bunch of extra deductions and then on top of that shelter whatever income there is all tax-free.

  Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-22-2005, 08:34 PM   #22
Thinks s/he gets paid by the post
Join Date: Jan 2004
Posts: 2,049

Bringing this thread back from the dead.

"More than one plan. If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $41,000 or 100% of the participant's compensation. When you figure this limit, you must add your contributions to all defined contribution plans. Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans."


"If an employee is a participant in any other employer plan during the year and has elective salary reductions or deferred compensation under those plans, the salary reduction contributions under a SIMPLE IRA plan also are elective deferrals that count toward the overall annual limit ($13,000 for 2004) on exclusion of salary reduction contributions and other elective deferrals."

Notice that a SEP is more beneficial for those with another plan at their day job. This, I believe, is because a SEP is a profit-sharing plan rather then an elective deferral plan. In a SEP, the employer makes the contributions - in a SIMPLE, the employee makes the contributions.

*Usual disclaimer: I'm no CPA, tax attorney, blahblah. Don't believe everything you read on the net.

eridanus is offline   Reply With Quote


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
SEP IRA, WHAT ARE DIFFERENCES FROM TRADITIONAL IRA? fire2china FIRE and Money 1 02-05-2007 07:38 PM
Help! SEP IRA was transferred into a Traditional IRA...bad? soupcxan FIRE and Money 5 12-19-2006 11:19 AM
Simple vs SEP IRA ferco FIRE and Money 7 10-24-2006 01:52 PM
Possible to combine SEP IRA with standard IRA? soupcxan FIRE and Money 2 07-16-2006 11:08 AM


All times are GMT -6. The time now is 01:12 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.