During 2018, Jerry is a self-employed therapist, and his net earned income is $187,600 from his practice. Jerry's SEP Plan, a de

Question

jok3333 [9.3K]

3 years ago

7

During 2018, Jerry is a self-employed therapist, and his net earned income is $187,600 from his practice. Jerry's SEP Plan, a de

fined contribution plan, states that he will contribute the maximum amount allowable.
Calculate Jerry's contribution.

Business

1 answer:

DerKrebs [107] · Answer 1 · 2022-05-05T01:53:24+03:00

Answer:

$55,000

Explanation:

A Simplified Employee Pension (SEP) Plan is used in the United States by employers or self-employed persons to provide retirement benefits for themselves and their employees

As stated by the Internal Revenue Service (IRS), the contributions that can be made to each employee’s SEP-IRA each year is which one is lower between 25% of compensation and the maximum of $55,000 for 2018.

We can then calculate as follow:

1. Jerry's contribution calculation = 25% × $187,600 = 46,900.

2. Maximum allowable = $55,000.

Since a defined contribution plan states that Jerry will contribute the maximum amount allowable and the maximum for 2018 is $55,000, Jerry's contribution will therefore be $55,000.