February 20, 2008
SEP IRA Facts
Not many you of know that the tax advantages obtained by using SEP IRA can be neutralized by additional taxes. There are problems with defined contribution retirement plan. Additional taxes exist in the following situations - excess contributions; early withdrawals; not making required withdrawals. Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction. An example of such prohibited transaction is if an employee improperly uses his or her SEP-IRA, such as by borrowing money from it. If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred.
