### Author Topic: SEP v SIMPLE IRA Calculator  (Read 292 times)

#### Clarice

• Posts: 1
##### SEP v SIMPLE IRA Calculator
« on: June 10, 2018, 12:03:43 PM »
Hi all, thanks for having me.

I've spent some time researching the classic SEP v. SIMPLE for a small business, owned by a married couple, with 1 non-owner employee. I've built a calculator that will decide - quantitatively - for me. Please see the attached.

Even though I am now paying the non-owner employee more money, this is fully offset by the tax savings of the firm's much higher contributions to the SEP v. the SIMPLE.

With salaries of \$340k and SIMPLE contributions of 3%, that puts total contributions at \$10.2k. With SIMPLE contributions of 25%, that puts total contributions at \$85k.
Of the \$340k in salaries, \$60k is paid to a non-owner. \$60k at 3% = \$1.8k versus \$60k at 25% = \$15k. That's a cost increase of \$13.2k
Then, total contributions of \$85k less \$10.2k = \$74.8k multiplied by the business's tax rate of 25% = \$23.8 in tax savings.

Too, don't forget that the SEP's higher contribution limit allows immediately for more tax-sheltered savings, which is an incremental benefit.

« Last Edit: June 11, 2018, 06:05:12 PM by Clarice »