Last week, we at EricJohn Ltd. suggested making contributions to traditional IRAs as a last-minute tactic to cut some income – and taxes – on a 2016 return. This year, those dollars must be deposited by April 18, so there is some urgency.
But taxpayers who are self-employed can stretch out that deadline for months if they have an SEP (or Simplified Employee Pension) plan, which is a specialized variety of IRA. They can create those extra months by requesting an extension for filing the tax return.
The Internal Revenue Service says that, unlike other types of IRAs, contributions to SEP-IRAs can be made until the due date for the return including extensions. This year, that’s October 16.
Sole proprietors and other self-employed business people with SEP-IRAs might find the longer period to be valuable. “Many clients will delay filing so they can collect from customers (sales) enough money to put a large sum into a SEP, thus significantly reducing their taxes,” says Eric Buechler, EricJohn Ltd.’s founder.
There are some technicalities affecting contributions from self-employed owners to their own SEPs. The IRS has thoughtfully put together an FAQ covering those and other SEP-related issues. Check online at https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions for that quick-answer sheet. For a more general explanation of SEPs, go to https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-sep
But, for the personal touch, Eric is experienced in dealing with SEP-IRAs for small business clients. To pursue that strategy, now is the time to seek filing extensions.