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SIMPLE IRA - Savings Incentive Match Plans For Employees

The SIMPLE IRA plan is a retirement plan. Small employers and self employed individuals can set up this IRA retirement plan.

It is a tax favored retirement plan that is a written salary reduction agreement between you and your employer or for yourself if you are self-employed.

It is designed to reduce your salary by a specific percentage. Your employer contributes that amount to the SIMPLE IRA for your benefit.

These are called "Salary Reduction Contributions".

You have to have received at least $5,000. from your employers in the past 2 years before the current year.

You will have to have reason to expect to get at least $5,000 compensation in the current year, and any future years that contributions are made.

This also applies to a self employed person who received earned income.

For self employed, compensation is your net earnings Schedule SE Form 1040  Section A, line 4 or Section B line 6.

For Self employed see IRS publication 560

You will be excluded if:

  1. You have retirement benefits covered by a collective bargaining agreement (Union Contract).

  2. You are an employee who is a nonresident alien, and you have received no earned income from sources within the USA.

  3. You are an employee who would not have been eligible if an acquisition, disposition, or similar transaction had not occurred during the year.

Find the information starting on page 67 of IRS Publication 590.

Also known as Individual Retirement Arrangement.

Read the details of how to set up a SIMPLE plan in this IRS Publication 560
There are financial figures for this year as well as last year.


Disclaimer: Before you make an investment get legal or professional advice.