“I’m self-used. Provided financial uncertainty about the coronavirus outbreak, should really I continue to make a contribution to my SEP I.R.A.?”
Contributing to a retirement account warrants some warning appropriate now for self-employed men and women, considering that they really don’t get a common paycheck.
Self-employed folks with SEP I.R.A.s (limited for “simplified personnel pension unique retirement arrangements”) generally make annual contributions at tax time, once they wrap up their tax returns and see how their income shakes out. They can help you save 25 per cent of their earnings, up to sure limits. SEP contributions are tax deductible and can be designed up to the tax filing deadline, or later on if the taxpayer will get a 6-thirty day period extension to file.
This yr, provided the sudden slowdown in economic activity, it may be smart to use a submitting extension, postpone a SEP contribution and as a substitute develop a reserve for shelling out payments if desired, reported Patrick Healey, a financial planner in Jersey Town, N.J.
Mr. Healey said he experienced a SEP I.R.A. and could possibly just do that himself. “Right now,” he reported, “cash is king.”
Later on in the calendar year, the economic outlook ought to be clearer, and you can make a contribution if you really feel protected. Verify with your tax adviser, nevertheless, ahead of choosing.
It’s normally quick to get a six-thirty day period filing extension from the Internal Income Service by filing a variety. Most a long time, that offers you until eventually Oct. 15 to make a SEP contribution and file your return. (Delayed contributions aren’t frequently obtainable with common or Roth I.R.A.s.)
A six-month extension allows further time to file, but doesn’t allow extra time to shell out. You normally have to estimate what you owe and make a payment by the authentic submitting deadline. That is usually April 15 — but this year, the federal federal government is going tax working day to July 15.
The I.R.S. should make clear numerous specifics about the adjust, so it is unclear if submitting for an extension will give you a comprehensive 6 months — until Jan. 15, 2021 — to make a SEP contribution and file your 2019 return, or if the Oct. 15 deadline will use.
“We’ll know more as to how this operates as we solution July 15,” reported Chris Hesse, chair of the tax executive committee at the American Institute of Certified Public Accountants.