Kathy is 48 years of age and self-employed.During 2013 she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to a simplified employee pension (SEP) IRA for 2013?
A)$11,152
B)$16,652
C)$56,500
D)$51,000

Question

Quizplus · Accepted Answer

The maximum contribution to a SEP IRA is the lesser of 25% of net earnings from self-employment or $51,000 for 2013. Kathy's net earnings are $60,000 ($100,000 - $40,000), and 25% of that is $15,000. However, the contribution is calculated as 20% of net earnings after deducting the self-employment tax, which results in $11,152.

Kathy Is 48 Years of Age and Self-Employed