A SEP Plan Can Be Set Up So That

question 9

Multiple Choice

A SEP plan can be set up so that

• A) All employees who are at least 21 years old and have worked for three of the past five years are covered
• B) The corporation can handsomely reward the highly paid employees
• C) The employees can make $2,500 in a SEP and an additional $2,500 tax-deductible contribution in an IRA
• D) The employees can make tax-deferred contributions which are not currently deductible from taxes
• E) The employees can avoid the 125 percent discrimination test even when the contributions are higher than $2,500

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Definitions:

Annual Sales

The total revenue a company generates from its operations over a one-year period.

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue, indicating the financial performance in a given period.

Total Revenue

Total Revenue is the full amount of income generated by the sale of goods or services related to a company's primary operations.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales generated by comparing net income and revenue.