 If you're a small business, this SEP is often going to be limited as well to how much income you have, so it would be nice oftentimes to once again be able to calculate your taxes and then be able to determine how much you're able to be putting money into a SEP. So notice as a tax preparer, if you're dealing with people with a Schedule C, then this is something you kind of want to keep in mind as a topic that will probably come up if the business starts to be profitable. If they have positive cash flow, then they might want to put money away more than they can put away into say an IRA and that usually goes into an exploration of the possibility of a SEP or a SEMPL and you can then explore those options. Okay, so SEP, simple and qualified plans offer you and your employees a tax-favored way to save for retirement. You can deduct contributions you make to the plan for your employees on line 19 of Schedule C. So when we're talking about the amount that's going to be put away for the employees, that's part of the business benefits. So that's going to be a normal, ordinary, necessary deduction on the Schedule C. If you are a sole proprietor, you can deduct contributions you make to the plan for yourself on line 16 of Schedule 1, Form 1040. So we end up with the same kind of situation and I would still, I think the best way to imagine this is to try to say, okay, if I was an employee, employer situation, how would things form formulate? And then if I'm a sole proprietor, where the government is once again kind of treating me as if I'm an employee and employer of myself by charging me Social Security and Medicare, how is it going to work in that case? How have they adjusted the tax code? In other words, if it was a corporation, which was a separate legal entity that was paying an employee, then the corporation would be able to deduct the amount that they put into the retirement plan, which we can of course do for our employees. But what about the amount that I put into the retirement plan for myself? You would think I'm, even though I'm not paying myself wages, I'm not processing W2 wages for myself, you're still treating me as an employee of myself because you're charging me Social Security and Medicare. So you would think that they would allow me a deduction for the amount that I put into the retirement plan, the SEP or simple or whatever. But you don't get it on the schedule, so you do, you don't get it on the schedule C though, it's on the schedule one, it's going to be the above the line type of deduction for income and above the line type of deduction. That also helps to do the calculation and figure out how much you can put in because there's going to often be limitations on how much you can put in based on the amount of income you have. So oftentimes this, what you want to have at the end of the year on the small businesses have significant cash flow that you are able to put in to a retirement plan and then try to figure out the maximum you can put into a retirement plan if you have the cash flow to do that. Obviously tax planning oftentimes is dependent upon whether or not you have the cash flow to do it. So you can also deduct trustees fees and contributions to the plan, plan do not cover them. So earnings on the contributions are generally tax free until you or your employee receive distributions from the plan. So it's similar to an IRA. It's similar to a 401k plan. You're getting a benefit upfront. You're restricting your money by putting them under this umbrella similar to an IRA and a 401k plan so you can't take the money out in exchange for the tax benefit that you're going to be getting. So you may also be able to claim a tax credit if you begin a new qualified defined benefit or defined contribution plan including a 401k plan, simple plan or set plan. The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan up to a maximum of $500 per year for each of the first three years of the plan. So obviously setting up, it depends how complex the plan is. So obviously a simple and a set are a lot more easy to set up than a 401k plan, but a 401k plan has more flexibility and benefits in it. So you have to think about setting it up and administering the plan. Under certain plans, employees can have you contribute limited amounts of their before tax pay to a plan. These amounts and earnings on them are generally tax-free until your employees receive distributions from the plan. That's another tax benefit. So for more information on retirement plans for small businesses, see publication 560. So if you're in a situation where you want to dig into these and do some comparing and contrasting and see which plans would best suit you, you can dive into that publication. Some of the general things you're looking for oftentimes are going to be, you know, am I allowed to kind of figure the calculation that I'm going to put in personally after the tax year has ended, which can really help for planning oftentimes for small businesses? What's the maximum that I can put in? Can I do some kind of matching situation? And so those are going to be the some of the general kind of things you want to be comparing and contrasting. How much administration fee? How much does it cost to administer the plan? And what are the requirements if I have employees for the contributions for the employees? What's the bottom line requirements that I have to do? And what's the top line requirements that I have to do for the employees? Because sometimes people set them up focusing on the employees as the main reason. Other times they're setting it up focused on your own contributions because you're trying to increase your contributions over what you can put in to a general IRA. Tip! Pub 590A, which you can find on the IRS website, Contributions to Individual Retirement Arrangement IRAs, discusses other tax-favoured ways to save for retirement.